This question has only one answer. It depends.

Many things go into a successful transaction, and it all begins with you, the business owner. In this post, I will highlight three areas for you to start the process of answering: Is my business ready to sell? One of the assumptions is that you have a two to three year window before you want to sell.

Be Prepared Idea #1

As I talk to business owners, I often hear, “I need X $’s from my business to retire." Why I ask, and the response is usually “because that is what my financial advisor or accountants have told me.” So, they put a value of at least X on the business. Is that realistic? Are there buyers or investors willing to pay that amount? How do you find out?

You invest! Determine what others believe your company is worth by having a valuation done. Taking a 3-5 year historical look at your business through a financial lens, looking at the balance sheet and income statements. During this process, adjustments may take place for salaries, inventory, customer concentration, and other expenses or assets of the company. A reputable firm will look at several approaches to valuing the company, as the buyer type can have a significant impact on what proceeds you receive.

Now you receive the valuation. You are likely pissed off, angry, or in a panic because there is a significant gap what your X and the valuation. Take a deep breath. The good news is that you can make a substantial impact if you have time on your side. You now have a scorecard to be able to close your gap to achieve your desired goal.

Be Prepared Idea #2

Now you know what you did not want to know. So, what are you going to do about it? Are you going to make increasing the value of your company a priority?

Are your financials in order? What I mean by this is there a clear line between you and your business. Do you run your personal expenses through the company? Your cars, fuel, insurance, meals, vacations, and entertainment. If this is you, it is impossible for a buyer to see the investment value of the company without a forensic accountant. Incredibly, you may be paying less in taxes, and how is that hurting your business? The good news is that you have time to change. Having a clear financial picture of the company, and the cash it can provide to live a particular lifestyle gets a buyer’s interest! Also, you may gain a better multiple because of it.

Having clean financial records 3-5 years ahead of a sale will create a better opportunity for buyer’s to see the company’s true worth. The new owner may see the cash as an opportunity to invest in new capital, and they may not see that if you mix your money.

Be Prepared Idea #3

What is next for you? Do you have a clear understanding of why you want to leave the business? This story can play a critical role in a buyer moving forward or walking.



Seller: I am at an age where I just want to get out because I am tired of doing this, I want to pay off my debt, and just go and relax.

If you as a buyer heard this as a first story, what impression do you get of this business? What is the motivation of the seller? Are you thinking an old company without energy, or innovation, and most importantly, you may be able to get on the cheap.