The 10 "musts" prior to marketing
your firm
1) Get your financial records accurate and up to date. If possible, get audited financials. Even better, have an audit done by recognized regional firm at a minimum. This is especially recommended for companies with revenues in excess of $5 million.
2) Clean up, organize and update all business records. This includes such items as payroll, benefits, taxes, inventory,
receivables, payables, equipment and real estate leases, trademarks, patents, shareholder loans, customer and vendor contracts, sales and third party distribution contracts, etc.
3) Do an in-depth SWOT analysis. In no more that one-page each, determine and list the Strengths, Weaknesses, Opportunities and Threats to the business. In addition to helping you with the assistance of an experienced advisor determine the value of the business, a SWOT analysis will enable you to begin to "tweek" the business plan and prepare to position the enterprise most effectively at the time of sale.
4) If there are problems in the business that have caused a recent reversal in an otherwise solid historical trend, fix them now. If prospects for revenue growth are not that rosy, get costs in line. Statistically, profitability growth counts approximately twice as much as revenue growth in determining value. You want to bring your business to market in an up trend where you can be offensive instead of defensive.
5) Explore and address the "shareholder" issues. These include assessing a potential sale within the framework of lifetime goals and other desired pursuits. Is the entrepreneur ready to turn over the reins of the business? If so, is she or he prepared to stay with the business for a period of time, say three years, to transition the business to the new owners and see to it that the new owners receive full value for their purchase? What type of buyer (strategically and culturally) would the entrepreneur wish to transition the business to? Finally, what type of post-transaction business arrangement
does the entrepreneur desire? This includes time commitment, geographical location, terms of earn-out (if any),
employment contract, etc.
6) If your business is a partnership, you must have a buy/sell agreement in place, and most importantly, agreement as to the goals in pursuing a transaction relative to price, structure, likely attractive acquirers, post transaction commitments to the business etc. Conflicting goals between partners in a formal partnership or in a corporation will present significant problems in completing a transaction.
7) In determining a price range with your advisor, be reasonable. Look to the market, market trends and how your value proposition plays to these trends. Be open and creative in determining a transaction structure. A potential suitor might have a set of internal circumstances making possible the unique structuring of a transaction, which will enable the entrepreneur to extract extra value.
8) Don't try to dominate the negotiations. Rely on your advisor's negotiating skills to keep discussions positive, never letting issues of "face" impede the process. Above all, keep your eye on your business. All too often, owners become so focused on the transaction that they forget what made their business successful in the first place and what suitors are looking for (i.e.
sales, cost controls, margins).
9) Be patient. Remember, just as your successful business took time to build, patience is equally necessary in maximizing and realizing the value of your business. The average time from start to finish in the transaction process is six months. However, just as a transaction can be completed in ninety days (if a potential suitor wants to make a pre-emptive offer), so can a transaction take a year to complete. This is normal. Realistic expectations are imperative.
10) Make the commitment. If you are not sure that you are ready both professionally and emotionally after having assessed and completed the first nine "musts", then don't start. The time is not yet right. Quiet resolve and commitment is necessary to successfully complete the transaction process. Looking for excuses in midstream not to complete the process will diminish relationships, credibility and business performance.
The effective completion and adherence to these "musts", along with mapping out and implementing a detailed transaction plan, will ensure a sale realizing the greatest monetary and emotional value.
2) Clean up, organize and update all business records. This includes such items as payroll, benefits, taxes, inventory,
receivables, payables, equipment and real estate leases, trademarks, patents, shareholder loans, customer and vendor contracts, sales and third party distribution contracts, etc.
3) Do an in-depth SWOT analysis. In no more that one-page each, determine and list the Strengths, Weaknesses, Opportunities and Threats to the business. In addition to helping you with the assistance of an experienced advisor determine the value of the business, a SWOT analysis will enable you to begin to "tweek" the business plan and prepare to position the enterprise most effectively at the time of sale.
4) If there are problems in the business that have caused a recent reversal in an otherwise solid historical trend, fix them now. If prospects for revenue growth are not that rosy, get costs in line. Statistically, profitability growth counts approximately twice as much as revenue growth in determining value. You want to bring your business to market in an up trend where you can be offensive instead of defensive.
5) Explore and address the "shareholder" issues. These include assessing a potential sale within the framework of lifetime goals and other desired pursuits. Is the entrepreneur ready to turn over the reins of the business? If so, is she or he prepared to stay with the business for a period of time, say three years, to transition the business to the new owners and see to it that the new owners receive full value for their purchase? What type of buyer (strategically and culturally) would the entrepreneur wish to transition the business to? Finally, what type of post-transaction business arrangement
does the entrepreneur desire? This includes time commitment, geographical location, terms of earn-out (if any),
employment contract, etc.
6) If your business is a partnership, you must have a buy/sell agreement in place, and most importantly, agreement as to the goals in pursuing a transaction relative to price, structure, likely attractive acquirers, post transaction commitments to the business etc. Conflicting goals between partners in a formal partnership or in a corporation will present significant problems in completing a transaction.
7) In determining a price range with your advisor, be reasonable. Look to the market, market trends and how your value proposition plays to these trends. Be open and creative in determining a transaction structure. A potential suitor might have a set of internal circumstances making possible the unique structuring of a transaction, which will enable the entrepreneur to extract extra value.
8) Don't try to dominate the negotiations. Rely on your advisor's negotiating skills to keep discussions positive, never letting issues of "face" impede the process. Above all, keep your eye on your business. All too often, owners become so focused on the transaction that they forget what made their business successful in the first place and what suitors are looking for (i.e.
sales, cost controls, margins).
9) Be patient. Remember, just as your successful business took time to build, patience is equally necessary in maximizing and realizing the value of your business. The average time from start to finish in the transaction process is six months. However, just as a transaction can be completed in ninety days (if a potential suitor wants to make a pre-emptive offer), so can a transaction take a year to complete. This is normal. Realistic expectations are imperative.
10) Make the commitment. If you are not sure that you are ready both professionally and emotionally after having assessed and completed the first nine "musts", then don't start. The time is not yet right. Quiet resolve and commitment is necessary to successfully complete the transaction process. Looking for excuses in midstream not to complete the process will diminish relationships, credibility and business performance.
The effective completion and adherence to these "musts", along with mapping out and implementing a detailed transaction plan, will ensure a sale realizing the greatest monetary and emotional value.
