seven steps to selling your business
TRANSCRIPT
02/14/12 1
Seven Steps to Selling Your
Business In A Tough Market!
Presentation by:
Larry GreeneMercury Business Brokerage
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Introduction
• Purpose of this presentation
– Objective:
• Review the preparation steps required for a successful business sale
– Outcome:
• Know how your business must appear to attract qualified Buyers
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Steps to Freedom
1. Commitment
2. Financial Housekeeping
3. Lower Overhead
4. Get Lean and Mean
5. Paint Up / Fix Up
6. Build a Team
7. Tax Planning
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Step 1: Committment
• Are you ready to let go?– Are there family members involved?
– Is your spouse ready for a change?
– Seek agreement from these stakeholders
• Plan for the future– What are you going to do next?
• Are you financially prepared?
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Step 2: Financial Housekeeping
• Income Statement (P&L)
• Is Uncle George still on the payroll?
• Is the business still paying for the vacation home?
• Personal cars
• Family members cars
• Personal credit cards
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Step 2: Financial Housekeeping
• Income Statement (P&L)
– All businesses have these ‘discretionary items’ on the income statement
– Remove them or categorize them so that they are easy to identify
– Make sure the P&L is ‘clean’
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Step 2: Financial Housekeeping
• Balance Sheet– Make sure all business assets are included
– Remove all items that are personal assets
– Remove old items that are no longer used in the business
– Remove personal loans or ‘Loans to Shareholder’
– All financial statements should be transparent
– Don’t make the Buyer guess what is included
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Step 3: Lower Overhead
• Two highest costs are labor and rent
• Review your operation with a critical eye
• Has your staff gotten ‘fat’?
• Reduce payroll in all areas possible
• Can technology replace labor?
• Can you outsource certain tasks at lower cost?
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Step 3: Lower Overhead
• Sublease excess space
• Move to location that better fits your needs
• Renegotiate your lease
– Obtain longer term if location is important
– Additional Lease Option for extra years
– Necessary to have minimum 10 years for SBA loan
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Step 4: Get Lean and Mean
• Is your sales staff still selling?
– This is an area that becomes lax most often
– Review sales salaries/commissions
• Cross-train staff members to be more efficient
• A Buyer won’t accept that you ‘really don’t need’ certain staff
• Review processes to remove unnecessary operational steps
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Step 4: Get Lean and Mean
• Lower Cost of Goods
– Renegotiate with suppliers for better prices
– Outsource low margin products/services
• Review contracts with customers and suppliers
• Supplier policies may have changed to your benefit
• Shop liability and health insurance policies for competitiveness
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Step 5: Paint Up / Fix Up
• Remove all old debris from storage and plant
• Remove unused manufacturing equipment
• Sell or donate unused office furniture
• Paint offices
• Update signage
• Update collateral material
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Step 6: Build a Team
• Choose your Professional Team
– Certified Business Intermediary (CBI)
– Transaction attorney
– Transaction Certified Public Accountant
– Financial Planner
– Insurance Broker
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Step 6: Build a Team
• Have a professional valuation performed by a Certified valuation expert
• Get an equipment appraisal done by a Certified Equipment Appraiser
• Discuss typical acquisition scenarios with your Professional Team
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Step 7: Tax Planning
• Start a discussion with a tax expert about the sale of your business
• Stock sale or asset sale?
• All cash or seller finance?
• Start a discussion with your financial planner about handling proceeds from the business sale
• Not all accountants and attorneys are expert in business sales transactions
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Summary
• Make a commitment• Start early
– Don’t wait until you are ready to sell
– Time on the market varies, typical 9 to 15 months
• Clean up everything– Financials
– Staff
– Office / Plant
• Find out what your business is worth• Plan ahead to pay less taxes upon sale• Then, go to market
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The Big Payoff
For Every Extra Dollar
You Add To Your Bottom Line The Value Of Your Business
May Increase ByThree Dollars
Larry Greene, CBIMercury Business Brokerage
Phone (714) 813-0581Email: [email protected] 18
Business Resource Group
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