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By Peter Holtz, CPA
Perhaps, like me, you are a person who reads with interest the business section of your favorite newspaper. I am long fascinated when two companies selling seemingly similar products and or services are sold for vastly different prices. Fascination aside, there is no magic to this. There are a few distinct and identifiable reasons why one is able to command top dollars as its selling price.
Planning It Applied Then and It Applies Now
You will no doubt recall the long hours and hard work you invested to grow your business. The same tenacity and attention to detail you used then should be used when selling your business.
Your goal should be to look as attractive as possible to a potential buyer. An important factor in bolstering the stats of your business when preparing to sell is time. It is recommended that you start this process at least three years before intending to sell. The reason you want to start this three years prior to selling is because most buyers will want to look at financial information for that period of time to confirm that your business has staying power and steady income potential before they consider making an offer.
Increase Your Businesss Income
The first thing a potential buyer will want to know is what your business revenue and net income are. A great way to position your company in the most favorable light is to bolster your income statement.
Talk to your accountant about how to cast your financials to reflect growth and success. Examples of what can be done can include:
Increase your marketing budget – This raises the inflow of new customers
Hire a new employee on a commission or contract basis to show expansion
Expand the hours of operation to generate more revenue
In tandem with increasing your revenues, you will also want to look at reducing unnecessary expenses. Talk to your accountant about options for reducing expenditures, such as taking a critical look at your depreciation and inventory reporting methods.
Remove Unproductive Assets and Acquire New Ones
Take a hard look at your business assets. To prepare for a sale, you should be making plans to sell or dispose of unproductive assets that arent doing anything for your small business. An example can include cleaning up your inventory by removing items that arent selling. You may incur a loss doing this, but what you will be gaining is the less tangible but more important advantage that your business will look better to a potential buyer and get you the highest sale price possible.
Another move you may consider is to replace any machinery that’s nearing the end of its useful life, and do any necessary repairs and upgrades. Most buyers want to purchase a turnkey operation that allows them walk in, turn on the lights, and the business continues to operate with no immediate need for investment on their part.
As you can see, by performing the necessary planning, streamlining your inventory and increasing the value of your business will allow you to fetch the highest sale price when you sell your business.
About the Author: Peter Holtz, CPA specializes in providing accounting and tax services to small business owners and professional practices in Stockton, CA. For more information, go here:
financialperformancecenter.com
Source:
isnare.com
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