Preparing to Sell Your Business?

Jun 16, 16 • Whitepapers


selling a businessFor those who put their heart and soul into building a business in the industrial and energy sector, the time may come when selling the business may be the right thing to do. Taking that step requires carefully following a thoughtful and executable exit plan. Following are a few key items to consider:

Set Goals. Explore Your Options.

Why do I want to sell my business? What do I hope to achieve by selling my business? What options do I have?  How much is my business worth? How should I go about selling my business to ensure obtaining maximum value and a successful closing? Who can help me? What steps should I take now?

These are the typical questions virtually all business owners ask when contemplating a sale of their business.  Knowing your goals and your options before commencing a business sale process arms you with valuable knowledge, sets reasonable expectations and helps to develop an executable and actionable path to follow.

Bolster the Bottom Line.

Maximizing business value is one of the most important goals when selling a business.  Buyers value businesses based on their expected future earnings outlook, which is highly influenced by historical earnings and previous trends. Therefore, bolstering the bottom line should be a key area of focus.

Reduce Risk.

Put yourself in the buyers’ shoes. What will a buyer perceive as a risk? Is there a way to mitigate that risk?  Here are some basic ways to reduce the risks to a buyer (and increase value):

  • diversify the company’s customer base (ideally no single customer should account for more than 20% of revenue)
  • build a fully functional management team with defined roles so that the business is not reliant solely on the owner;
  • make sure all documentation is accurate and complete, including customer and vendor contracts, employment agreements, leases, loans, corporate legal formation and company ownership;
  • ensure the facilities and equipment are well-maintained and look appealing;
  • manage working capital efficiently, eliminate uncollectible accounts, write-off obsolescent inventory and ensure bills are paid timely;
  • resolve any outstanding material liabilities, such as litigation, tax or labor matters, or at least create a reserve against these; and
  • while it sounds simplistic, make sure that all financial statements over the previous few years are accurate, transparent and clearly documented and supported (ideally obtain an audit).

Engage Your Team of Professionals.

Get help. Selling a business is complex, time-intensive and can be a distraction from running the business.  The last thing an owner wants to see is his business falter as he is trying to complete a sale. So it is imperative to continue to focus on operating the business throughout the sale process.  Plus, buyers have very experienced teams working on their side.  It is important to make sure you also have an experienced team working for you.

Therefore, one of the first items on the agenda should be to engage a team of experienced professionals who will be your advocate.  Examples of professionals to interview and engage include lawyers with an expertise in transactions, accountants and merger and acquisition advisors.  M&A advisors may be from boutique firms that specialize in certain industry niches, business types or geographies or they may be from large investment banks. For example, our firm is a boutique investment bank specializing in providing merger and acquisition services to middle market companies in the energy and industrial sector.

Have a Post-Closing Personal Plan.

What will be your role in the business, if any, after you sell?  What other things outside of your business do you want to pursue? How much time will you have and how do you want to spend it?  Do you have a prudent financial, tax and estate plan?  Answering these questions before embarking on a business sale process will give you the direction and confidence to enter into it with drive and motivation and will minimize trepidation or “cold feet”.

The People to Contact.

Wilcox Swartzwelder & Co. is a Dallas-based boutique investment bank providing merger and acquisition advisory services to middle market energy and industrial companies.  Principals have executed over 100 transactions representing in excess of $3.9 billion of aggregate value. Contact us today.

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