Running a business is more than just managing daily operations. If you’re a business owner then you already know that what you really own is a long-term investment that must be regularly tended to, nurtured and evaluated in the hopes of maximizing on your investment when the time comes to sell.
More than half of a business owner’s net worth is tied up in their business, but oftentimes they are unable to accurately identify what their business is actually worth. Knowing the true value of your company is important for countless reasons, but it is especially critical if you have plans to eventually sell your business and retire.
Stop taking your business for granted and discover what you can do today to cash in on your business tomorrow.
Grow Your Business’s Value
Instead of focusing on the factors you can’t control, become mindful of those you can. For example, take a look at the products and services that impact your gross margin. Is one doing better than the others? Instead of wasting time and money with a large offering, maybe it’s time to focus your effort on initiatives that are the most profitable. By employing efficient management techniques such as these, you may be able to increase your cash flow with minimal effort.
Make An Effective Exit Strategy
Selling your business is not an overnight decision. It can take years to settle on a right course of action. But how are you supposed to know what the right course of action is? The exit strategy you land on will depend on several factors. From how your departure from the company will affect your family and your employees to how you want to spend your days during retirement, personal preferences will weigh into your decision more than you probably think. In addition to knowing what exit strategies are available, make sure you have a clear idea of what you want.
Ensure a Successful Transition
Do you want your transition to be smooth? Would you like your exit strategy to be implemented without a hitch? Then you have to communicate. As soon as you decide on an exit strategy, share your strategy with your family, your financial advisor, your lawyer, and the rest of your leadership team. Your plan can’t be executed if no one actually knows what that plan is. Just as important as communication is timing. For example, after you have communicated your plan with your team early on in the process, you are better positioned to analyze and take advantage of key indicators that will make the transition more favorable. Your ability to react to indicators such as economic conditions, interest rates, industry trends, buyer activity and company performance are all factors to consider if you are looking to maximize the sale.
Looking for more tips and tricks? This six-part series provides more insight into the transition process.
Don’t let yourself get caught off guard when the time comes to sell your business. For more information about the valuation process, what you should do to prepare your company for the marketplace, how to create your perfect exit strategy and more, check out Valuing and Selling Your Business: A Quick Guide to Cashing In.
By Tim McDaniel, CPA/ABV, ASA, CBA