As we head into the Holiday Season, human psychology kicks in and we start making resolutions for the new year, 2021. On a personal basis, that may include vacations, home projects, or something more life changing like changing jobs, or moving to another city. If you are an entrepreneur, you might be planning to expand your business or perhaps you are considering selling your business. This month’s article is going to address some resolutions for the business owner considering a sale, although some of the suggestions certainly apply to those entrepreneurs looking to improve the operations and value of a business that may not go on the market for a couple of years or longer.
Look at your business through the eyes of a buyer. Do you have an appropriate management team? Is your equipment and technology up to date? Does your business make a good first impression when people call, come to your facility, or visit your website?
Work with your advisory team, which should consist of your accountant/tax advisor, a business transfer attorney, and a business intermediary to advise you on the sale process. It is critical that your financial statements are timely and accurate, particularly in today’s environment when lenders have tightened up their underwriting scrutiny.
Update or document your processes and procedures. Well documented processes and procedures can add value and the lack of good documentation can kill a transaction or diminish value.
Mitigate customer concentration. Neither buyers or lenders like customer concentration as it increases risk in the event that the significant customer leaves or goes out of business. A rule of thumb is that no customer should account for ten percent or more of sales or gross profits.
Update or develop a business plan. You may have a clear vision of what you want your business to be and where you want to take it, but sharing that vision can be challenging. Having a written business plan will differentiate your business from other businesses on the market and make your business more valuable.
The team at The FBB Group, Ltd. wishes you and yours a pleasant and safe holiday season. We give thanks to our clients, our customers, and the professionals that have been referring our services for over thirty-eight years.
The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.
Ronald V. Chernak
Inspiring business relationships since 1982!
(Article previously published in August 2019 Newsletter)