Establish a new market? Attract recurring revenue? Create a new sales and marketing program? While these efforts can add value to your company, one of the best ways to add value is to prepare your company for sale now so that you can sell it when the “stars are aligned”. Now what does this mean?

Many company owners eventually seek an exit through the sale of their business. It is one of the succession options available to business owners to achieve liquidity and create a path to retirement.

However, many business owners do not consider preparation until very near the time they wish to sell. Because of this, it is possible that the process may be undertaken hastily; as a result, the outcome may not be as favorable as it could have been with advance preparation.

By preparing your company for sale in advance, you can undertake the process without the stress of an imminent transaction, thereby increasing the sale value of your company and having the greatest chance of achieving a successful closing.

Selling a company is a complicated process. Even for companies that are well-prepared, the process can take many months. Unfortunately, in many instances a multitude of factors make it best to sell during a specific time frame. Business owners must undertake advance preparation to capitalize on market timing.

Factors that dictate timing are both in and out of the control of the business owner. Internal factors in the control of the business owner include strong operating results, a robust customer pipeline, new products under development, and generally, the company is “clicking on all cylinders”.  External factors can include good fundamentals within the company’s served market, significant M&A within the company’s industry, a strong economy, and a strong bank lending environment, among others. We like to say that the “stars are aligned for a sale” when many of these factors, both internal and external, are present.

In the presence of such factors business owners can realize the highest value and best terms from the sale of their company and have the highest likelihood of a successful closing.  But the business owner must have taken steps to prepare their business for sale expeditiously while these factors are in their favor. “Star alignment” is fragile and the stars can become misaligned quickly. The company could lose a customer.  The economy could soften. Banks could tighten lending parameters. Preparing your company for sale while the stars are aligned consumes precious time and puts a successful transaction at risk.

So what does “preparing your company for sale” mean? Preparation means something different for every company. It can range from accounting to tax matters, determining the earning stream that is being offered for sale to buyers (“quality of earnings”), preparing annual budgets and rolling 3-5 year projections, simplifying the organizational structure, and addressing odds and ends that are unique to each company. A more in depth discussion of preparing your company for sale will be described in future emails.

Preparing your company for sale takes a considerable amount of time and effort, but it comes with a host of benefits as described above. It may take 3-4 months to several years to properly prepare your company.  However, once the company is prepared, the process only needs to be maintained rather than recreated every year. Owners should be assured that there is a significant ROI on this investment.  An upfront investment perhaps as little as $20,000 to $30,000 with an annual maintenance investment of $10,000 to $20,000 could result in a sale value that is millions of dollars more than the sale value without advance preparation.

If you are considering selling your company in the next three to five years, now would be a good time to contact Bruml Capital Corporation for an assessment with respect to steps to take to prepare your company for sale. BCC has completed numerous successful sale engagements and possesses the expert knowledge to advise you on these matters.