Tips About Selling Your Company
As we begin a new year with its numerous economic challenges, the pundits of doom and gloom would have you believe that the sale of your company is now impossible. They are wrong. Companies and smaller businesses in Southern Arizona still are being bought and sold every day.
My associates at Hallmark Business Consultants and I visit, daily, with a number of purchasers and sellers and we are producing outstanding results even in these “weak economic times.” We believe the reasons for successful sales are based upon a couple of realities. The first is that the value of closely held businesses is determined more by the internal attributes of the business and less from external economic conditions or factors. The second reality is that quality sells in any economic market. In other words buyers will pay a higher value for higher quality and lower risk.
For a company’s owner to enhance their wealth when exiting their businesses, the correct strategy is to improve value and not wait for “better economic times”. Of course that begs the question – How do I do that?
Over the course of more than 25 years with more than 500 transactions under our belts, Hallmark has become one of Arizona’s leaders in the profession of brokering smaller businesses as well as being an intermediary in larger merger and acquisition transactions. We have systematically developed some specific recommendations to maximize your company’s value.
Here are some thoughts for you to consider.
- Eliminate anything that might diminish the value of your company. Obsolete inventories, unneeded equipment, and excess (unproductive) employees are some of the detractors.
- Be sure that your financial statements and tax returns are current. Company purchasers and their CPAs will expect to review at least three and sometimes five years of financial data.
- Emphasize your company’s successes. Some of these might be client or customer testimonials, industry awards, membership in trade associations, and/or an outstanding marketing plan that you have in place. Company buyers perceive less risk if you have a diversified base of clients or customers rather than a high concentration of the same.
- “Pull the weeds”. By this we mean that you should do everything possible to create a good first impression. Remember that you do not get a second chance at a first impression. Look at the appearance of your company’s premises. Does your building or office need a fresh coat of paint, is the parking lot full of potholes, and does the roof leak thereby staining your ceiling tiles? Do not stop at your workplace. Polish your website and your marketing materials.
- Assemble a multi-disciplinary team of professionals who will be able to provide you the best help possible. There are a myriad of legal and tax issues with which you may not be familiar. Our firm prefers to work with and involve knowledgeable, transaction oriented attorneys and CPAs on your team of advisors. In the long run you may enjoy significant tax savings as a result of working closely with your advisors.
- Conduct the due diligence of your own company. For those unfamiliar with the term “due diligence”, it is the detailed information about your financial data, legal issues, employees, customers, suppliers, and products. An in depth look at these may disclose problem areas or discrepancies that you can correct before a prospective buyer discovers them.
- Select an intermediary who can present your business to a wide range of prospective buyers. Your company may have strategic values that one of those buyers might value greatly. The intermediary representing your company must be able to help estimate the value of your business.
We would be pleased to meet you and your professional advisors to discuss the selling process. Of course, any and all discussions are highly confidential.