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You Want to Sell Your Business Someday – How to Prepare Today

Every Business Needs an Exit Strategy. Do you want to Run Your Company Forever? Do you Want to Sell your business? Do you want to leave your business to your children? Do you want to sell your business to Your Employees? Do you Just want to close your doors and Move on? How do you want to exit your business?- And when? Recently a good friend of mine that is a successful owner contacted me about the prospect of selling his Company in a few years. He asked me to contact him regarding what he may want to be doing now to prepare his business for sale. He has a successful growing company, he has grown his number of employees from 10 to 75 over the last 18 months. He is effective at gaining new contracts and growing revenue, but like so many businessmen, he has never attempted to sell his business.

Normally during the startup of a new venture the thought of an exit strategy is not even a consideration. Then small business owners get so involved with the day-today operation of their operation that again an exit strategy is either not even thought of or possibly just put on the back burner. Taking some time to put some thought into your exit strategy can go a long way to increasing your odds of exiting your business the way you desire to.

Planning, gaining knowledge, and preparing may be the 3 most important measures you can take when considering an effective exit strategy. If your exit strategy involves an interest in trying to successfully sell your business in several years, what sort of measures or actions should an owner take to make this successful:

  1. Make sure your financials are in order. Clean understandable Income Statements and Balance Sheets will add value to your business.
  2. Systematize and document your operations and procedures. Well documented policies, procedures and practices are a sign of a well run company and probably would help your company run better, and add value. If you got hit by a truck tomorrow could someone use your documented practices to help continue run your company?
  3. Move your business towards a business that does not rely on you. Do your customers do business with your company or do customers do business with you. When you go to sell your business are you selling a business that is dependent on you the owner or a self-sustaining business based on a solid philosophy, solid customer service and reliable employees and practices. Or when you go away, does your business go away?
  4. Speak to your trusted advisers- let them know your intentions see if they have any input suggestions that could help move you towards this goal. Trusted advisers may include your attorney, CPA, financial advisor, business brokers.
  5. Learn by speaking to your trusted advisers what are the most important aspects that affect your business value. How does one value your business? What is most important to business buyers?- Your Assets, your cash flow, your sales, your number of customers, your patents, trademarks, your competitive advantage. Learn what the real driving factors are behind raising the value of your business and work on them. Understand that not all businesses that attempt to sell actually do find a business buyer and sell.
  6. Running your company and concurrently, preparing your business for sale is a viable approach towards business transition. It is not a” one or the other approach”. Preparing your business for sale does not need to get in the way of running your company, and most measures improve your company. If you make needed improvements to your business and or operations and decide not to sell your business or exit your business, you still most likely will have a better company on your hands.

For planning purposes try to learn what the potential value of your business may be. Also educate yourself on the business buying or selling marketplace. It is not always the same. Selling a business during the 90′s was different than selling a business in 2006, and is significantly different than selling a business in 2010. If you think you want to sell your business in 5 years for $1M, attempt to understand what realistically your approximate value may be today. If your business may realistically only be worth $250,000- change your expectations, change your time frame, or maybe more importantly get to work on making necessary changes to your business.

What If I Die? Business Succession Planning

“In this world nothing is certain but death and taxes,” according to the famous words of Benjamin Franklin. That said, as a business owner, you should consider what will happen to your business if you die suddenly. You must prepare for the unexpected by communicating your wishes in writing regarding the future of your business before you die.

Specify whether your family members should retain, sell or liquidate the business. If you would like the business to continue providing a steady cash flow for surviving family members, who will manage the daily operations? Who will make financial decisions? What advisors can the family trust? How will management be compensated for staying on with the business? Has anyone expressed interest in buying your business?

Business continuity planning identifies business functions that are crucial to the business’ survival and helps the organization resume its most important suppliers, vendors and key contacts that keep the business running smoothly. By undertaking a periodic review of the business and writing a business continuity plan, you will be forced to consider who will run the business in case of his early demise.

To keep the business running profitably after your death, you must plan for retaining key employees who are indispensable to the business. If they leave, the business will be in grave trouble. The plan should provide key employees with a substantial pay increase to keep them on board after your demise.

Buy-Sell Agreement
If your business involves co-owners, a written and funded buy-sell agreement allows for orderly disposition of the business. It can be between shareholders of a corporation, partners of a partnership, or a key employee and a sole proprietor. The agreement obligates the surviving business owners, key employees, or the business itself to purchase the interest of the deceased owner.

Its advantages are:
• It creates a guaranteed market for the business interest.
• It allows for those who are interested in continuing the business to do so without interference from the owner’s heirs.
• It provides liquidity of the deceased owner’s estate by turning the business interest into cash.
• It establishes the value of the business for federal estate tax purposes.

This agreement needs to address all transfer issues. It must be kept up-to-date and always reflect the current value of the business. The agreement needs to be adequately funded with life insurance, employee stock ownership plans or other vehicles to guarantee that there will be funds to execute the transfer.
Business-Owner Life Insurance

Your business will incur financial losses upon your death. By purchasing inexpensive term life insurance, you will bolster the company’s cash position. When determining your life insurance needs, be sure to consider any costs, expenses or liabilities related to your business and how they will be handled when you’re gone. A financial consultant can advise you how much life insurance coverage you may need.

By providing this protection to your family members, you will give them peace of mind and there will be funds available when creditors come knocking. The life insurance proceeds also can secure ongoing capitalization for the business. Purchasing life insurance is only one way you, as a business owner, can prepare for death. Money cannot buy happiness, but it makes your departure easier for your survivors. And by having committed succession management in place, your business can continue smoothly in your absence.

If you are a business owner and would love to learn more…contact me directly – I’d be happy to answer ANY questions you may have.

A Business Contact

One of the major issues you need to pay attention to once you transition from college to a job is your business contacts.

Once settled in your job, you will come across a lot of people whether inside your own organization or outside. It is customary for business people nowadays to have business cards that capture the important information about themselves.

A business card of a business contact will contain:

- His name
- His company name
- His role in the company
- His contact information like telephone and email
- His address
- And some people include their company’s mission or vision statements on their business cards.

I advise you to have a business card. Do not accept not having one in your organization. If your company, which I doubt it, does not provide you with cards then go out and do them yourself. There are thousands of places where you can do this nicely and cheaply. The bottom line is you must have them no matter what.

Your business card will be like a mini brochure about yourself that you can give to another business contact to keep in touch.

The next time you attend a company meeting or function whether internally or externally, make sure to meet new people. You should have a goal actually to know at least 2 or 3 new people. Make it a habit to ask your new business contact for his or her card. More often than not he will ask you back for yours.

Once you take a business card from someone, do not hurry to hide it in your pocket or wallet. Instead grab it in your hand and read it thoroughly. If your business contact does not ask for your card during or after you read his, offer him yours by saying, “And this is mine” while extending one of your business cards to him.

It is considered rude sometimes to take a business card and not read it.

Now here is the interesting thing, this small piece of cartoon contains a wealth of information to keep a conversation alive with your business contact.

From the address on the card you would know where he or she is living, in which country and city. So you can ask him or her about the city he or she lives in? About living there? Its weather and tourist places for example.

From the position in the company, you can ask about the role in the company and what he or she specifically does. You get the idea, be creative, try to come up with as many topics to talk about from the information you see on the card as possible. I will tell you now about something important you need to do. After you and your business contact separate, you need to capture essential information about the contact on the back of the card.

So once you separate, flip the card and write the following:

- Where you met
- Anything interesting you discussed
- Any promises made (You might have promised to send some documentation about a product you sell or a story you read or whatever)
- Any personal information, like for example your business contact might have mentioned that he or she has two sons or that he or she likes a certain restaurant
- Any features that would remind you of him or her again, like if he has a black beard or if she has wide eyes

You get the idea, try to capture as much information as you can on the back of the business card itself. You might be thinking that the business card is too small to capture all this information, but believe me when I say that you can put all the above and more, I have done it myself many times.

The reason why you should write this information on the back of the business card is that leaving it to memory will not be a good strategy as you might forget or mix the conversations of two business contacts.

In summary, these are some of the important tips you need to keep in mind when you come across a business contact. First, do not forget to have your business cards. Keep a load of them with you, in your jacket, in the car, in the office, in the house. Always make sure that you have your business cards with you wherever you go. They will help perform the above drill and open a conversation with someone. They are the mark of a sophisticated networker. Remember always to read the business card of a business contact the moment he hands it to you. Make it a habit to capture the important information you come to know about the business contact on the back of the business card.

To your success… cheers.