So you’ve worked for several years, building a business that has sustained you and your family, allowed you to provide a few dozen jobs (or more) over the years for your grateful employees, and generally allowed you to be a good corporate citizen. You certainly don’t want to do this forever, however; life begins at […]
So you’ve worked for several years, building a business that has sustained you and your family, allowed you to provide a few dozen jobs (or more) over the years for your grateful employees, and generally allowed you to be a good corporate citizen.
You certainly don’t want to do this forever, however; life begins at retirement, after all, and you want to make sure that you’re able to truly enjoy the fruits of your labour. So, the sale of your business is in order. For purposes of this article, we assume that you are approximately 5 years away from actually leaving your work career behind.
What issues need to be addressed in order to prepare for the day when your business is firmly placed in your rear-view mirror? Here are a few thoughts:
You will need to be able to take corrective action to improve the value of your business if you know what your baseline is. It is also a good idea to have this done annually as you approach the day where you will no longer be involved in the business- you need to know how the business value is trending from one year to the next. You ostensibly would like for this number to be increasing over time, and it is a good idea to verify that independently.
Ask yourself this question- what if your employees all left TODAY? Maybe they all pitched in and bought a winning Powerball ticket, and now they each have $3 million coming to them? If your business would be adversely impacted, maybe you need to look at providing more documentation on all of the duties of your employees.
On a related note- your financials need to include 5-year projections/pro forma financial statements. This is key to understanding what the business outlook is, and in fact is an important component of one of the most important business valuation methods- the Discounted Cash Flow analysis.
It typically takes a minimum of 6 months for a broker to get your business sold- in all likelihood, you’re going to need more time than this.
Think of all of the administrative items that you need to get done- your name off of the leases, debt obligations, Secretary of State filings, etc- a lot to do there. A good business broker will be able to assist you with this.
Ensure that your employees and management staff are all going to be able to keep the business thriving through the transitional period- you will especially want to ensure that they are all trained appropriately.
These are a few considerations that you might want to entertain as part of the overall process of planning for the change of ownership of your business; if you would like to talk about how this impacts you specifically, please feel free to contact me for a confidential, no-obligation conversation.A few thoughts:
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