Selling a business

I just had the pleasure of spending some time with a business broker and in the course of our conversation discovered that we share many of the same observations about business owners who want to sell their companies. As a B2B CFO® partner I work closely with owners to help them achieve their goals and, in general, a much higher level of success. In doing so, I perform a wide variety of things for them depending on the situation. Typically a lot of my time is spent helping them get their books and financial statements in order so that they can present an accurate picture of their business to bankers, brokers, the IRS, etc. when and as needed. I also spend a lot of time helping owners define and implement strategic business plans and even exit strategy plans for the longer term. And, of course, a big reason they seek my help is to help them find the cash they need to grow their businesses.

A business broker on the other hand works on behalf of a business owner when the owner’s goal is to sell the business. In many cases brokers find that the price a business can bring on the open market is considerably lower than what the owner thinks a business is worth. Some of that is caused by unrealistic expectations on the part of the sellers. But often it is because an owner has not engaged me or someone like me to help them get their business ready to sell. It’s kind of like selling a house. A fresh coat of paint might cost $2,000 but the value of the house suddenly goes up a multiple of that cost – great investment! The same goes for getting a business ready to sell. Buyers are generally looking for a turn-key operation where the accounting is accurate and there are good financial controls and, where operating processes are well defined and documented. Buyers want to buy companies whose operations and profits can and will continue on in a strong predictable fashion even when the seller is out of the picture.

So, the moral of this short story is this. Invest in your business to make it financially and operationally solid. Remember the coat of paint on a house. Whatever you spend to do this will payoff many times over when you get ready to sell the business. Actually, once that is done, an owner might discover that the business is far more profitable than originally thought. The second moral of the story is to build the business so that it does not revolve around a seller. Businesses that are built around one person have very little value, if any, to a potential buyer. Sellers – remember that you want to sell a business, not you!

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