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Smart Business Owners Plan Their Exit Strategy

Maximize Value

How can I maximize the value of my business? As a Transworld Business Brokerage, we are asked this question frequently. There are steps and strategies a business owner can employ when preparing to sell a business. The key is preparation – the better prepared your exit strategy is, the higher the selling price it will command, and the more likely it will sell. A few minor enhancements can dramatically increase the marketability of your business.

Exit Strategy

When selling a home, most people will paint the exterior, landscape the yard, or upgrade the interior. Why? Because it will sell faster and command a higher price. Yet, many business owners, when selling their business, simply decide to sell one day and put it on the market with no preparation or plan. In reality, an exit strategy for a business could reap huge financial rewards for the owner when the business is sold.

 

The Importance of Preparation

Why don‘t many business owners do more to prepare their business? It all seems overwhelming and they aren't sure exactly where to start.  This is where you call us and one of our business advisors in the office will be able to help you!  Another reason could be to burn out. It is difficult to take the time and effort to prepare everything when all you want to do is walk away.

Remember, on average, it takes 8 months or more to sell a business. Your goal is to get a good price, but also to make sure your business is one that is attractive and sells quickly. Any work that is put in will pay off.

Maximize your Seller Discretionary Earnings: The period of time just before a business is put on the market should be a time when everything is done to show the highest earnings possible. Every dollar of SDE could mean 2 to 3.5 dollars in selling price. If you grow your sales just $30,000 that means your business could reap you an extra $100,000. Every effort should be made to show growth. Growing businesses sell for a premium.

 

Don’t forget the timing

Timing when to sell can be difficult. It means taking a hard look at your operation. Have sales peaked? Is your business profitable? Is your business stable and/or growing? Are the proper systems in place for your business to operate on a day to day basis? If these answers are yes then it is a good time to sell. If not, it may be advisable to wait a short time. Additionally, if there are any trends that are affecting the industry that you are in then it may be a good idea to wait as well. The best time to sell your business is when you are having your best year ever.

 

Selling a business that's not making a profit?

What happens if you're not making a profit?  Should you still try and sell your business?  It's possible, but it might not be as easy.  There are people out there that specifically want to buy a non-profitable business. Someone buying a business such as this must have a game plan to turn around or improve the business.

 

Why would someone be interested in an unprofitable business?

It could be a variety of reasons.  Maybe...

  • The business has a valuable location. This could be in an area where locations are hard to find or heavily restricted by governing authorities such as alcohol, late hours, historical district, etc.
  • The business has a valuable specialized license for gambling, alcohol, medical services, etc. that is hard to get or on which there is a current or permanent moratorium.
  • All furniture, fixtures, and equipment are in place and operational.
  • The business occupies a retail or manufacturing location that is “built out” with all building and operational permits in place.
  • Suppliers/vendors of goods/inventory are in place.
  • A significant/critical yellow page ad is in place. It can take up to 3-4 years for a yellow page ad to achieve full impact as people tend to keep and use old telephone books for up to a couple of years.
  • a web page is usually in place.
  • Trained employees are in place.
  • Inventory/supplies are in place.
  • Even though business profits are none or little, the business is not losing money. Businesses started from scratch usually negatively cash flow for 6-12 months.
  • In some instances, it is cheaper than starting a similar business from scratch.
  • A buyer can be in business immediately, whereas starting a business from scratch can take 1-6 months to get up and running.
  • Businesses started from scratch have a 90-95% failure rate in the first year according to Dun and Bradstreet.
  • There is a base of existing customers most of whom are usually repeat customers.
  • Many first-generation immigrants with large families will buy a business of this type. They will replace the existing staff with family members turning what is now payroll into net income. A large reduction in payroll, quite often makes the business nicely profitable.
  • If the business is a franchise, the franchisor’s staff will provide valuable guidance and assistance in making the business profitable. Franchise units appropriately run are overwhelmingly successful and profitable.

Seek Expert Advice

No matter your exit strategy, it is critical to conduct the sale with the help of a trusted business broker or advisor. Simply putting out the proverbial " for sale" sign can greatly affect your business's value, driving away employees, customers, and vendors. Business brokers and advisors like Transworld keep your sale confidential, offer the utmost expertise in valuing your business, and ensure that you get the best price possible. Also making sure that the best buyers are attracted to your opportunity takes the effort of a worldwide network that Transworld has like no other company.

Lauren Altschuler
Lauren Altschuler
I assist buyers and sellers of privately held businesses in the buying and selling process. We help value your business for the best price, advertise it confidentially to qualified buyers, handle buyer interviews, discussions, negotiations and facilitate the due diligence investigation and the sale of the business.

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Ten Steps To Selling Your Business

Our Sellers except us to achieve the highest and best offer for their business while taking the least amount of their time away from it as possible. That is because the absolute best use of their time is to continue to run and grow the company.  If revenue or profits begin to decline, buyers will walk away or decrease their offer. Transworld's philosophy can be summed up in a ten step, how-to strategy that culminates with the sale of a company. This proven method has been used to sell hundreds of businesses.  Here are the steps. Step1 Comprehensive Business Analysis and Feedback As your business broker, the first thing in our how-to strategy is to analyze your operation, finances, market potential and industry trends. We take that information and advise you on steps to prepare your business for sale, and  generate a business profile that represents your company in the most attractive way possible. Step2 Sale Structure We identify the best possible price range to sell your company. This is based on solid facts, the condition of the market, projected growth, sales potential and the sale of similar businesses within your industry. Transworld’s experts apply sophisticated, time-proven valuation techniques to ensure that your price is appropriate for the current market condition. The price must not be too high or too low. Yet, it must represent an attractive investment potential for the buyer. Step3 Confidentially Network The Business For Sale During the selling process, we utilize the latest technology to present your company to other business brokers and strategic buyers all over the world. This greatly multiplies the effort in your favor. With Transworld Business Advisors, you have literally thousands of industry professionals confidentially representing your company to buyers.   Step4 Confidentially Advertise To Buyers Our aggressive marketing program ensures your confidentiality and provides maximum exposure for your company. Your listing is placed in various industry databases, Internet sites, and publications which are constantly updated. We spend more money in advertising and marketing for buyers than anyone else in our industry. Step5 Control The Information Flow We organize all necessary documentation and release information only as needed. We use limited information when advertising to maintain confidentiality. Buyers are pre-qualified and required to execute a confidentiality agreement before receiving any sensitive business information. Step6 Create Competition For Your Company We attract thousands of buyers, creating competition for your business. Buyers are qualified for financial ability to meet the offer, and we engage you with only the most qualified buyers. Once you meet the best of the buyers, we urge them to prepare and present all offers. We can continue to engage potential buyers on your behalf as negotiation on an offer is in process and have another interested party ready to go should a buyer change their mind. Step7 We Negotiate For You To Achieve The Best Price Appropriate negotiation is crucial to achieving your best price and terms. We have the expertise to establish sound and resourceful negotiating techniques on your behalf. Transworld has trained all of its agents in the art of negotiating through curriculum that we have created specifically for our industry. Never negotiate without planning, expertise, or from a position of weakness. Step8 We Provide Exceptional Support To You Through The Due Diligence Process We take pride in our exceptional service. Only half of the job is finding the right buyer who will pay your price and meet your terms. The other half is getting that buyer to the closing table. We quarterback the deal, work with the accountants, lawyers, banks, landlords, and other third parties that could jeopardize the success of the transaction. We realize that you depend on us to guide you through the sale of your business. We make the transition simple and easy for you. We know when an opportunity for you may arise and are always there to take advantage of it. We also know when someone is trying to kill your deal or is being unreasonable and how to handle those situations. Step9 We Are There From Beginning To The Closing We help manage all administrative procedures, licenses, inventory counts and lease assignments that may be required. Transworld works closely with your advisors to ensure a smooth transition. Using the latest technology, we strive to be ready to work on your behalf to get the deal done! Step10 We Are There For The Transitional Phase And Beyond! Because we are in the business community, you may want to consult us from time to time after the sale. We will provide you with the assistance after closing. Transworld will always remain in your corner! Schedule Consultation Now

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