An around the world cruise, playing the top 50 golf courses in the world, relaxing on a beach in a far away exotic place sipping your favorite beverage…. Or enter your indulgence here!
Every business owner wants to maximize the value of their business at exit. The problem is they may not know where to start or what to do. To maximize the value of your business, it’s critical to avoid these 5 costly mistakes:
- Not having audited financials for at least three years. Buyers pay big bucks for a financial person to poke holes in your financials in order to get the value down. Don’t let them do it. Pay the up-front price to obtain audited financials and let your CPA find the holes in your financials before the buyer does.
- Not making sure your company runs without you. Buyers are interested in buying businesses with transferable value. Transferable value = value of the business – the owner. If the owner is the business, then the transferable value = 0 and you won’t find a buyer. If you have a question about this, call me today, 770-597-3136.
- Not obtaining employment agreements with key people with stay pay after your exit. The value you’ve built in your firm is based on having key people in positions in your company that really drive. The worst thing that could happen to the buyer is they walk out the day after the sale. If they’re not in place, you give your buyer an opportunity to negotiate your value down.
- Not having a deal team. It takes a village to sell a business. Your CPA is a critical member to advise you on alternative strategies to minimize taxes. Your attorney will advise you on legal points of the deal to minimize risk to you in the sale. Your investment banker’s job is to get a bidding war going for your business and drive the price up. Also important is an advisor that can walk through the process with you and provide sage counsel when asked.
- Not accounting for taxes and payment of debt in your final sale number. Every business owner should have a number they’re striving for at exit. But, that number needs to be net of taxes and debt. In most cases, the buyer is purchasing assets, not liabilities. So, be prepared to deduct any debt that is paid off with sale proceeds along with taxes.
You only exit once. Be sure you do it right. If you aren’t sure about your next step, call me today, 770-597-3136.