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Built 4 Sale: Preparing Your Business for Sale

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In recent years our country has experienced a great deal of change including a rapid decline in the economy. As we continue to slowly recover and adapt to new markets, we are faced with many challenges and opportunities. To add to this ever changing landscape, 2011 marked the beginning of the baby boom generation, turning sixty five.

 

According to a survey conducted in 2008, by White Horse Advisors and Vistage International, boomers will turn 65 at a rate of 10,000 boomers per day (1 every 67 seconds) for the next nineteen years.

 

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As boomers retire, many of them are not just leaving a job; many are exiting their own businesses. Approximately 9 of the 15 million small businesses in the USA will change hands whether by generational transfer within families, employee ownership transfers or brokered sales. The truth is that many small business owners focus on business survival and future growth. Most of these retirees haven’t even begun to think about an exit strategy or how much their business is worth. 

 

Why is an exit strategy / succession plan so important?

The planning process puts the owner’s head in the game so to speak. Actively creating a plan will empower
the owner to: 1) honestly evaluate the health of the business, 2) identify and set the timeline for improvements, 3) implement the changes needed, and 4) identify the target date of transition to a new owner/ manager. This process will not only optimize the business value, but will help ensure continuity and give practical direction for the company’s future under new management. 

 

While there is no “one plan fits all," there are some general steps to take in preparing an exit plan:

  • Develop a business plan or update your old one, including a comprehensive market plan;
  • Develop a financial plan for continuity, future growth, & positive net value;
  • Implement/make corrections – key employees, update processes and systems inventory, bookkeeping, cash controls, correct any reputation issues the company may have;
  • Hire professionals: Lawyers, CPA, Financial planners for tax burden transitioning, legal contracts and estate planning;
  • After implementing the necessary changes and improvements, hire a certified appraiser for a valued opinion of “fair value” and “highest and best use” business appraisal (IRS will audit this number when you file your taxes so this will save you time);
  • Set the business price and engage potential negotiations for sale of business, transfer of ownership and/or business investment opportunities.
  • As you can see, this is not an overnight process. Ideally, an owner should start 3-4 years minimally before setting their retirement date. The time commitment that the owner puts in up front will leave the business in better shape for future owners as well as optimize the purchase price.

 

So who can help with all of this? The ND SBDC has been gearing up to work with long-term succession planning clients. You can refer clients to www.ndsbdc.org where they can pick the center closest to them and register for counseling assistance. 

 

By: Mary Beth Votava
Minot SBDC Regional Director
Originally published September 30, 2013 in the U.S. Small Business Administration's Dakota Connection.

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