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Positioning Your Company to Sell for Maximum Value


Considering selling your business? The time to start building value is long before you put the company on the market. To position your company so it will sell at the highest price, here are some of the things you should do: Create a 3-to 5-year business plan with projected financials. Include a narrative of what you expect to happen and the resources that will be needed to get there. Be sure your projected cash flow statement ties to your projected income statement and balance sheet.

• Assemble a strong management team. What I often see in small businesses is that the owner or CEO is the “face” of the company and, in effect, its only intangible asset. To sell the company you need to have a strong management team in place that customers and vendors are comfortable doing business with.

Give your managers authority to make decisions, and ensure that customers, vendors and other outsiders have a chance to get to know them. Help your managers develop strong reputations within your industry, such as by joining and participating in your trade association.

• Acquire strong vendor contracts. This is especially important if you’re a reseller. Can you get advantageous pricing and/or terms? Would they be willing to grant territorial exclusivity?

• Create 5 years of adjusted historical financial records. Start by identifying any unusual or non-recurring expenses that can be added back in. The goal is to show what the trues results of operation would have been if the company had been run “by the books” and didn’t have these unusual transactions.

For example, if you own both the company and the facility in which it operates, and you have a sweetheart rental agreement that gives you above-market rents, you should adjust the records as though only market rate was paid. Or if you’ve been paying high salaries to family members who aren’t really providing services, adjust the records to remove them from the payroll.

One thing to keep in mind here is that a business’ selling price is often determined by a multiple of expected cash flow. Pay close attention to this, and look at steps you can take now to increase your cash position .

Don’t wait until you have an interested potential buyer to start getting your ducks in a row. And if you need help with any of this, give me a call. As your part-time CFO, I’m here for you.

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