No Better Time to Prepare Your Company for Sale

You have built your business, planned on selling it and retiring in the next 12 months, but now the economy has forced you to change your plans. Your company is treading water and the last thing you want to do is think about preparing the business for market, when you feel the need to survive the rest of this year. This is a typical story for many company owners over the past few years. Don’t use the economy as an excuse for putting off your plans to sell the business.

Many of the strategies to increasing the value of a business and get it ready for sale can also be used to manage through the difficult economy. Value creation in a business can be done in good and poor economic times, but it does take more discipline when times are difficult. Focus on these four areas to improve your business, make it more attractive when put on the market and emerge a stronger company once the economy improves:

1. Assess and upgrade management. – Take a serious look at your management staff and key employees and identify those positions that need to be upgraded. It is an employer’s market and there is strong talent looking for the right opportunity. The new blood is good for driving improvements in your business today and a key to increasing the attractiveness of your business when it goes on the market.
2. Increasing revenues and cash flows – When it comes time to sell your company, the financial results will be measured compared to your industry’s performance. If your revenue growth/decline is as good or better than the industry, then you have been successful in building the value of your company. - Increasing revenues can be difficult during a tough economy, but you do have the ability to steal away customers from your competitors. Now is the time to get aggressive with programs targeted specifically at this prospect base. Use lower cost marketing programs to make the most of your budget. Some of these programs include PR, telemarketing, pay per click web advertising, search engine optimization and email marketing.
3. Recurring revenue stream – Find opportunities to generate new revenue and more specifically recurring business. A telemarketing firm that I have worked with in the past started a new program that included a database and 50 hours of telemarketing activity from dedicated callers. It turned out that I was thinking of starting a program, but this program was enough incentive to get me to sign up for their services.. Their intent is that the first 50 hours is successful and will generate additional telemarketing. They promoted this to those already in their database through an email blast – very low cost to run the program and successful.
4. Get your books in order – Now is the time to cleanup your legal and financial records. Your legal records will be reviewed by potential buyers and any board meeting minutes that are not up-to-date indicate that there may be other issues in your business that need to be addressed.

The last thing a potential buyer wants to hear when at the negotiation table is something having to do with “normalizing” expenses and cash flows because of what the owner took out of the business. Make those changes now, so you do not need to put yourself in a negative position at the negotiation table. These may include adjusting your salary to industry norm for someone running your business, eliminate cross charges with other companies you have setup to fund some of your interests, cut back on.

At some point, the economy will improve and the acquisition of privately held businesses will heat up again. We are all getting older, and the need to transition a business will not go away. When this happens, you can expect to a large number of businesses come onto the market. Those companies that took the time and effort to get prepared will be the companies that will sell first, and at a better price than those that only survived during the past two years. Don’t let the economy be your excuse to be a slave to your company and delay any retirement hopes you may have.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com