Some entrepreneurs are fortunate, and are able to sell their business after a few years for a huge profit. Whether this is luck or skill is open to debate, but one thing is certain – most small business owners aren’t going to end up cashing out for $100 million. Building a small business takes years of hard work, and many entrepreneurs continue to run their business for most of their lives.
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However, there comes a time when a small business owner will want to sell. Perhaps they want to retire, or just feel that it is time to move on to something else after all those years. When the time arrives, it’s important for them to make their business look attractive to potential investors, so that they can sell quickly and get the best possible price. If you find yourself in this position, you need to take steps to cast your business in the best possible light.
First of all, it’s essential that you maximize your profitability and optimize your cash flow. You may have become lax in how you manage your cash over the years – now is the time to set this straight. To start with, look at whether you are paying over the odds for leasing premises, and take corrective action wherever you can. Then, evaluate your suppliers to make sure that you are getting the best deal. Also look at whether you are taking advantage of things such as depreciating assets over the maximum allowed time period.
Next, focus on your core competencies. Buyers tend to favor companies that have a clear direction, rather than ones that are pursuing diverse opportunities. If you have multiple lines of business, go through the financials for each one, and think about cutting those that are off-target or not producing profits. You may also want to look at the types of customers you are serving and focus on one or two segments. By doing this, you will often improve your profitability as well as giving your business a more focused outline. Once you have done this, put together a business plan to project how you expect your reshaped business to perform over the next 3 to 5 years.
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Finally, you need to make sure that you have everything in place to support any acquisition process. It is absolutely essential at this point that you get legal advice on selling your business. Company acquisitions are a specialized field, so you need to make sure that you get a lawyer who has experience in this area – for example, take a look at Dr. Shahram Shirkhani’s profile to get a feel for the types of skills that you need. Work with your lawyer to understand the steps you need to go through to value your business, and to clearly establish what is to be included in the sale. Also discuss with them how to handle the acquisition process, including such things as responding to letters of intent and letting prospective buyers carry out due diligence.