3 THINGS TO DO BEFORE SELLING YOUR BUSINESS

In this over-extended economy, you may be considering to sell your business.  You don’t, however, want to sell at a price that you think is at the top, when your competitors may easily be able to turnaround and resell your company at a price that you could stand firm on and reap.  Buyers in the market are very aggressive, so it’s imperative that you are prepared for the objections and obstacles they may bring at the attempt to acquire your company at a lower price.
 

1. Know Financial Statement Analysis

 
You may be a business owner that may have delegated your financials to an expert so that you can focus on creating business relationships and expanding your revenue via sales.  Although delegation may be a good tactic for a while, this is the time in which understanding some key metrics in financial statement analysis can help you and your team reap the best rewards possible when selling.  First of all, the buyer may throw out negative comments, using indicators that may not have a heavy weight in your key industry.  For example, if you are a startup in the automobile company, the capital structure leverage may not be so important if you are earning an exponential growth rate.  The buyer may snub the fact that you have great market share and are growing exponentially by trying to frame the issue on a financial ratio that will not have a heavy impact.  Don’t let this happen to you and your company!
 
Instead, maintain your position by focusing on financial ratios that really matter: the growth profit margin of a company, incremental growth margins, revenue increases, ROA, Current Ratio, and Quick Ratio.  These are great ratios to show off to your buyer that demonstrates your company truly deserves to have a company valuation that is higher than most of your competitors.
 

1. Understand the Growth Rates of Your Competitors

 
Focusing on your company, your team, and the growth of your company are all things in which you should take control of.  Even though these are key benchmarks to measure and manage your business, your outward understanding and attention to detail on the innovations and constant improvements or challenges that your competitors run into may have a tremendous impact on your selling price.  Perhaps one of your competitors has plateaued for so long that you don’t even bother to research them, but when in fact they have hired a professional consultant or have very recently launched a new type of product that could have a detrimental effect and put downward pressure on your current product line.  It’s critical that you keep up with your research and competitive analysis.  You can definitely bet that if you are indeed growing and looking to sell your company at a great price, your competitors are looking to value themselves as well.
 

1. Master the Art of Negotiating for Value

 
Negotiating can be touch, especially when we are overwhelmed with multiple tasks, the pressure to constantly improve our networks and business relationships, the completing payroll, and even maintaining your vision for your company.  Now you’re possibly either selling your vision to another business owner or looking to take on your next vision for your business success.  Keep the conversation focused on not just the quantitative factors, but the qualitative factors to help your buyer realize that it’s not just the numbers that matter, but the purpose as to why the positions for each team member, the software used, and the methods to complete business operations matter.  It’s important to delineate to your buyer and to get them to understand the details as to why each piece of the business is structured the way that it is so that when the conversation comes to the price, you can stand firm on your position with valid reasons as to why each piece of your business fits together.
 
Conclusion
 
Understanding the key indicators in financial statement analysis that matter most for your business, understanding the growth rates of your competitors in your industry, and mastering negotiation are three powerful ways to help you maintain your selling price and to reap the rewards of your business success.  It’s time now for you to complete these three steps in order to truly sell your business at the top.