"1. Understand the Company’s Pros and Cons. It might seem like common sense, but we recommend that our clients sit down for a few minutes and put into words all the great things about their company, especially the things that make it stand out from the competition. But just as important is to understand and be upfront about issues with the company – or rather – issues a Buyer might have when acquiring the business. Good M&A advisors are upfront and transparent about these potentially negative points because they will eventually come out sooner or later anyway, and if they aren’t explained up front, it can give potential Buyers a cause for concern. The vast majority of our deals are bank deals, and even if the negative aspects were to slip through the cracks, the bank would find it anyway, so there’s just no reason to hold back facts. We recommend bringing everything to the table – pros AND cons – and find solutions to help minimize the impact of the cons on the Buying entity.
2. Will Seasonality Impact the Sale? If a business’s sales flow has seasonality to it, the timing of a sale can be important. The best time to sell can be identified by reviewing the year over year financials and looking at trends. Once a closing period has been identified, then one can back-plan accordingly to identify the right time to begin marketing the business for sale.
3. When is the best time to Sell? What are your sales and profits trends year over year? In order to achieve the very best multiple for a business, you want to sell when it is on the upswing – and the bigger that upswing – the bigger the multiple. Many of our clients come to us asking to sell at a certain strike price, but if the market will not support such a price, they will often state that they will take some time to work harder and increase sales. While this can be a good strategy, the risk is that if sales plateau, or worse, begin to show negative trends, then the purchase multiple and resulting price can fall very fast. While there is a science to timing, it is best to speak with the intermediaries at ValleyBiggs very early in the process – they’ve closed many businesses – and they will help you identify whether it’s the right time to sell, and if so, an idea of marketplace comparables to get an idea of what the market will bear.
4. Post-Closing. Some sellers get burnt out running their business and/or get so focused on selling their business that they don’t think about what they are going to do after the business sells. This is also another good reason to contact ValleyBiggs. We can help you strategize. Sometimes, post-Closing activity can include continuing as a consultant for your business, and sometimes it means starting a new business and leaving your current one behind. It is best to get your arms around what you will do after your business sells as soon as possible because failing to do so can make you less flexible in transaction negotiations and less committed to the overall process.
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