sales tip #1

Strong Financial Statements

Your sales presentation to a prospective buyer will include the company financial statements for the past 3 years. Therefore, you should always prep your business to show a 2 or more years up-trend that supports your market value. This includes:

• increasing sales from the prior year
• incurring expenses that directly grow the business
• building a positive cash-flow stream

Additionally, you should:

• get rid of excess inventory
• pay off short and long-term obligations
• show a history of collectible receivables
• maintain a strong credit record with your lender
• ensure your G/L accounts are classified correctly
• resolve any complaints with business bureaus or other

Build Up Your Net Cash Position

Cash is King in any buy-sell relationship. Your financial records need to reflect the cash position of the business using standard accounting practices. But more importantly, you need to have a positive net cash position that support the asking price of your business.

Increasing the net cash position include the following:

• sales need to be trending up
• expenses need to be tightly controlled
• you should show collectible receivables
• inventory levels should be highly managed

Have a Defined Market and E-Commerce Strategy in Play

You need to market...market...market. But you need smart marketing that shows direct and e-commerce sales. Businesses with marketing plans in play allow a new owner to step in and capitalize on your established channels. That increases your value.

Carve Yourself Out of the Picture

The hardest business to sell is where the owner is the "goodwill" of the company. This becomes the biggest fear of buyers - once you leave, the business relationships dry up.

Revamping your operations to move you out of the day-to-day is a high value proposition for buyers. You are not removing yourself from the business, but lessening your role in the factors that make-up the goodwill value of the company.

• The less your business is dependent on key labor, the more valuable the business.
• The ideal business is when the buyer can take over a turn-key operation. The objective is to automate procedures and operations so that a system can be replicated and implemented by any person.

Deliver Exceptional Value

• As you prepare your business to sell, continue to deliver exceptional value to your customers.

We have more information on preparing for the sale

(links to our parent site at cfone.com - new win)

Sales Tip #2

Maximize Value By Having A Marketing Strategy In-place

The key ingredient for any buyer when taking over a company is having in place a marketing plan that has measurable returns. A viable marketing plan includes:

• established contracts or loyal customer base
• repeat sales
• working advertising plan
• defined market segmentation
• profitable e-commerce position

Ensuring A Steady Cash Flow

When the business owner demonstrates a marketing plan that is working, it increases the perceived value of the company to the prospective buyer. The greatest confidence you can place in the mind of the buyer is a plan that they can take over and build up, ensuring a positive cash flow for the future.

We have more information related to developing a viable marketing plan

(links to our parent site at cfone.com - new win)

 

sales tip #3

First, Keep It Confidential

The decision to sell your business should be kept among yourself and other select individuals for the following reasons:

• Avoid upsetting your employees
  Any rumors of a sale can be unsettling for any staff. Your employees want job security. Rumors of a pending sale may prompt employees to seek other employment
• Keep the Competition at Bay
  Once your competition finds out that you are for sale, they might undertake moves that can undermine your customers, suppliers, and creditors
  
  Rumors that 'you will no longer be in the business' could damage the goodwill that you have developed over the years

Second, Move Quickly

Once you make the decision to sell, jump into it quickly. The longer it takes to sell, the higher chance your employees, competitors, creditors, etc., may disrupt your continued operations -- which, can hurt for sales value. Suggestions:

• have your financial statements ready for review
• validate every potential buyer prior to showing them your sales sheet
• make yourself available as needed
• seek professional assistance from an advisor who can prepare the necessary documentation and keep things confidential and moving.

We can function as you advisor - let's get started

#4: whom to sell

Individual Buyers

Corporate downsizing has brought into the market business managers who are looking for new opportunities. These qualified managers see themselves buying and managing an established small business close to home.

The Competition

The competition may buy your business especially if you have a business market niche or product-line that they need. Sometimes it is financially feasible to buy an existing operation than to take the time and capital to build one up.

Businesses Looking to Expand or Compliment Their Product Line

Sometimes an established business in your related field is looking to expand their operations or to move into a new product line or service. It may be a lot cheaper to buy an established operation instead of setting up shop in a new market.

Investment Groups

You may have an investment group looking for investment opportunities. These investment teams will buy companies to divest or merge with similar businesses. They will scrutinize a company very carefully.

Investment Groups buy companies that are in growing markets, have good financials, maintain key management, and meet their investment objectives. They will pay top dollar for a company if these basic elements are in place.

Let us help you find the buyer for your business

#5: timing the sale

Timing the Sale of Your Business

Your reason to sell your business should be proceeded by a quick analysis of your personal and financial goals. Question:

1. Is your business less enjoyable now than it used to be?
2. Has your business become more challenging to manage or to keep going?
3. Has your business taken you away from your family and other personal commitments?
4. Do you lack the drive and capital to move your business to the next level to stay competitive?

If you answered yes to these questions, then it might be the right time to sell.

Careful Planning Is Critical on Timing Your Sale

Regardless of when you sell your business, you need a strategy that addresses these important timing issues:

• Plan Your Exit Timing:
  If retirement is your exit strategy, plan to sell well in advance of your retirement age. Buyers will sense your need to retire and may negotiate a lower sales price.
• Don't Leave Too Late:
  Burnout, boredom or just ready to throw in the towel may begin to show up in your financial statements. Any decline in your financials will lower the value of your goodwill and company value.
• Watch Your Markets:
  A bad time to sell is when a nationally-branded competitor enters your market.
• Watch the Industry Economy:
  Selling in a growing economy brings a higher price than selling is a recession. The best thing to do during a recession or economic slowdown is prep your company to achieve maximum value when the economy turns around.

But wait! Let's not jump too quickly. You must first prep your business to achieve the maximum sales value. We are talking about --

• strengthening your markets
• cleaning up the financial statements
• streamlining operations

We have guides on how to complete a selling prep

(links to our parent site at cfone.com - new win)

#6: company worth

The "Perceived" Value of the Company

The buyer's perceived value will determine the price. If the buyer thinks the price is too high in relation to the value delivered, they won't buy.

That is your challenge when setting price for your business. The price you get for your business will depend on how you market the business and to whom you market.

It is critical that you follow these two rules when setting price:

1. First, substantiate the true market value for your business:
   Picking a number our of the air will be challenged. You can substantiate your price by establishing a true market value on your company assets, sales, cash position, and market.
2. Second, market your value to the right segment of buyers:
   A buyer who has a clearly defined strategy why they want your business may pay a premium over your set price. Another buyer who is only interested in your company assets may be less willing to pay anywhere near the asking price.

The Strength of Your Competition Can Impact Market Value

The buyer will analyze your competitive position. They may request your competitive defense strategy. Example:

• you need to define the barriers of entry into your market — how easy or how difficult is it from someone entering your market to compete?
• you need to define the barriers of exit — can a competitor exit the business fairly easy or are the barriers so high that an attack on a competitor may force price retaliation?
• what competitive threats do you find from players in the value chain — can your supplier or buyer move up or down the value chain to compete directly?
• what gives you an competitive advantage over the next player — is it your retail location, marketing segmentation, product offering, or what? Be prepared to demonstrate and explain.

View our business valuations services for more information

#7: cash and price

The Higher the Cash Flow, The Higher the Asking Price

The asking price for a company can be determined by several factors, such as the:

• value of your assets
• value of your market reach
• value of your goodwill
• value of your location
• value of your technology

But the underlying factor that supports the asking price — regardless of the perceived market value of the business — is the sustainable cash flow that the business generates. This about it!

What the Buyer Looks At

What does the buyer need to support their decision to pay the asking price for your company? Enough cash to:

1. pay the buyer's salary
2. pay the financing costs to purchase the business
3. return a minimum investment for the down payment
4. generate working capital to grow the business

These are the minimum requirements. Thus when your business generates a higher cash flow, the higher your asking price

We have more information about pricing strategies

navigate

Navigate Business Prep Module
	business prep

Supporting Files
	marketing analysis
	financial analysis
	value analysis
	business selling tips

Site Files
	home
	business exit planning
	business broker services
	business valuations
	business prep - analysis
	business advisory services
	tools