At the start of a new year, business owners usually plan the next steps in their business. This may involve planning how to set a roadmap to sell your business, or you could be on the other side of looking for potential businesses to acquire.
According to James Shields (2015) from The Business Journals, “the roadmap for succession or liquidation of a middle-market company is not created overnight.” In order to achieve the desired end results, owners must clearly focus on their personal and business goals, align those goals, and then develop a strategy to implement the necessary steps.
Key Questions to Ask When Setting a Roadmap for Business
During the initial phase of planning, any business owner must ponder on these questions.
- What problems are you trying to solve?
Start from identifying the problems that you are trying to solve. Are you selling your business because you need funds for another business? Are you selling your business because you’re moving to a new location? Are you selling your business because of retirement?You see, there are many reasons for selling your business. And each reason is directed towards a problem you want to solve. Being clear about it will impact the actions that you will take afterwards.
- What are your personal and business goals?
Now that you’ve figured out the problems in the business, the next question must clarify your personal and business goals. Write down all objectives that make sense to you, and do not be afraid to cross out, rewrite, and rephrase any objectives you’ve listed down.What’s important is putting your goals into paper. Writing them down actually forces you to be clear on what you want to accomplish.
- Do your personal and business goals align?
After identifying your goals, determine whether your personal goals and business goals can be aligned. Both shouldn’t contradict each other, but rather open a clear strategy on how they can be achieved.For example, if a founder is retired, a business that depends heavily on new business from the founder will not be easy to sell.
These are only guide questions to serve as a starting point for your business roadmap. After you have clearly laid out your objectives, the next step is to create a strategic and tactical plan. Then, hire a strategic advisor to execute.
DDDC Business Advisory has a team you can rely on. With our strong background in business, we have already worked with a number of business sellers and buyers, and helped them close deals in their business sale. We believe that setting a strategic roadmap that is executed properly is key to a successful sale.
How to Sell Your Business in 2023 for Best Price
Here are five winning steps to help you sell your business for the best price.
If you’re only setting your roadmap this quarter, then you still have enough time to follow these steps, and get the most out of your business sale.
Step 1: Get a professional valuation.
We keep advising our readers to get a professional valuation to determine the true value of your company. Take note that getting a 3rd-party valuation firm brings credibility to your asking price.
Experts say that small businesses are worth 2-5 times their annual cash flow, plus other discretionary add-backs such as location, market demand, financial health, etc. BizBuySell reported that small businesses with an annual cash flow averaging to $100,000 received a sale price of about 1.90x their cash flow, while those with an annual cash flow of $300,000 and above received a sale price of about 2.81 times.
In addition to cash flow, savvy business buyers may want to see how the business can grow and thrive without you. So you must be ready with a strategic plan for this.
Step 2. Increase your sales.
One more way to make your business attractive to buyers is to improve the overall performance of your company to maximize profits and business value.
Remember that selling your business while sales are declining is not a good move as it would discourage many potential buyers. They often desire companies that gain a yearly sales growth of over 30%, which suggests that buyers are looking for a business that is THRIVING, NOT SURVIVING.
Step 3. Organize your finances.
Buyers look for businesses that are profitable and have long-term viability. So before making an offer, many would contemplate longer and perform due diligence to really study the business situation.
Some business buyers would look into everything, including equipment, real estate and business accrual financials. As a seller, you need to get these ready before you list your company for selling.
Work with an accountant or a professional in reviewing and organizing the following documents, among others:
- Financial statements
- Tax returns
- Inventories and equipment to be sold along with the business
- Intellectual property and intangible assets
- Operating manual
Be transparent, and present all information in a way that is useful to the buyers so they know what they are getting.
Doing this will save you lots of time and future headaches, and put your business in a highly marketable position.
Step 4. Time Your Exit.
Business owners must plan their business exit one or two years prior. Your business will be more attractive to customers if you are prepared. This includes improving your sales, financial records, and customer base.
Timing is important in selling your business. According to statistics, only 20-30% of businesses put on the market actually sell.
Since you’re thinking about how to set a roadmap to sell your business, take note that you can’t sell your business overnight. It takes careful planning and a huge investment in time, effort, money, and even skills.
In fact, you need to make your business grow first and be profitable before selling. Don’t wait until disaster strikes before you sell your business. Your company’s value will be depleted, or you may suffer a significant loss if you let that happen.
“The best time to sell a business is when it’s in good financial shape,” experts say.
Step 5. Hire a Third-Party Business Broker.
To ensure you are guided in every step of the way, you must hire a third-party business broker who can help you get the maximum value of your business and connect you with potential buyers.
Here are Top Benefits for Selling Your Business with a Business Broker.
A business broker can help you with:
- Business valuation and negotiation
- Due diligence
- Business listing
- Marketing and locating potential buyers
- Securing funding from a large network of financial institutions
- Negotiating favorable deal terms
- Fulfiling any licensing and permit requirements
- Maintaining confidentiality
Set a roadmap to sell your business now by working with a business broker that you can trust. Look for experts who know the process inside out, and who care about what you want to achieve.
Related Topics:
Sources:
[1] Shield, J. (2015). When selling your business, your roadmap starts with these 3 questions. The Business Journals.
[2] Raincatcher. (n.d.). How To Sell Your Business in 2023.