{"id":29,"date":"2016-06-06T01:28:04","date_gmt":"2016-06-06T04:28:04","guid":{"rendered":"http:\/\/www.askprivateequity.com\/?p=29"},"modified":"2016-07-10T00:21:49","modified_gmt":"2016-07-10T03:21:49","slug":"how-do-i-prepare-my-business-for-sale","status":"publish","type":"post","link":"https:\/\/www.askprivateequity.com\/index.php\/2016\/06\/06\/how-do-i-prepare-my-business-for-sale\/","title":{"rendered":"How Do I Prepare My Business For Sale?"},"content":{"rendered":"

\"76-7602-WOHF300Z\"<\/p>\n

One question that I get quite frequently is how to prepare a company for sale in order to maximize the price and make the sale as easy as possible.<\/p>\n

The Short Answer<\/em><\/strong><\/p>\n

Three things: 1) get your financials organized so that you can show a buyer at least 3 years of annual financials in Excel; 2) organize metrics for your business \u2013 at least having unit count or unit economics to help understand the business; and 3) craft your story \u2013 practice articulating your value proposition and having answers to questions like why you\u2019re different than competitors, why you win customers over competitors, etc.<\/p>\n

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  1. Organize your historical financials<\/u><\/strong>. Have your accountant review your internal financials, have him\/her ensure you\u2019re following GAAP (generally accepted accounting principles), and be able to have at least your annual historical financials over the past 3 years in a consolidated Excel sheet.<\/li>\n
  2. Get metrics driven.<\/u><\/strong>You want to have operational metrics that can tell the story behind the historical financials. Buyers like businesses that they can understand \u2013 and metrics help them understand the business. In a buyers\u2019 eyes, a well-run business is a metric driven business. At the very least you should have the unit economic metrics. This means that if, for example, your company sells umbrellas, you should lay out the sales price less all the discrete direct cost items for that product (breakdown of materials cost, labor cost for each unit, sales commissions, etc.). Further, you should have the total number of umbrella units you have sold each month, so that you can easily show revenue per umbrella, cost per umbrella etc. by simply dividing the total revenue and costs by that umbrella unit count. This will go a long way in helping buyers conceptualize your business, which will get them quickly up to speed on your business<\/li>\n
  3. Craft your story.\u00a0<\/u><\/strong>Just as important as the financials and metrics is telling the story and positioning your company the right way. Just like with metrics \u2013 buyers like businesses that they can understand, and articulating your story helps them understand your company. Start with the value proposition \u2013 this is the statement of value that you bring to your customers. The value proposition of an umbrella manufacturer may be that they \u2018provide rain protection products that are more portable and convenient to carry and last longer than conventional umbrellas at a highly competitive price.\u2019 It sounds simple to articulate the relative value you bring to your customers, but it is alarmingly common for a business owner to be unprepared to articulate this. In addition to the value proposition, you want to be able to articulate why customers choose you over competitors \u2013 examples may be product quality, lead time delivery, low warranty return rate, geographic location, etc. It is tempting just to speak to \u2018customer service\u2019 or \u2018good customer relationships\u2019 \u2013 and buyers hear these reasons from nearly all company owners \u2013 so to differentiate the story but I would urge you to, if at all possible, dig deeper to get to specific factors that engender that good service or good customer relationships. Lastly, a buyer is going to be focused on how you\u2019re going to keep your current customers, particularly any large customers, as well as how the company can grow. Be specific in addressing both of these concerns \u2013 describe the key customer relationship dynamic specifically, and have at least 2-3 specific avenues for ways to grow the company. Per future growth, the more specific the better. For example, rather than saying \u201cwe could grow by selling umbrellas to the big box retailer channel \u2013 we have never seriously gone after them,\u201d you should rather focus on \u201cthe umbrella category buyer at Costco is open to evaluating our product line, which could represent a $5 million annual opportunity per region.\u201d<\/li>\n<\/ol>\n

    Once you have your financials in order, have metrics that help tell the financials, and most importantly have a story that explains both the financials and metrics and helps buyers understand the businesses past, present and future \u2013 you\u2019re ready!<\/p>\n","protected":false},"excerpt":{"rendered":"

    One question that I get quite frequently is how to prepare a company for sale in order to maximize the price and make the sale as easy as possible. The Short Answer Three things: 1) get your financials organized so that you can show a buyer at least 3 years of annual financials in Excel; … Continue reading “How Do I Prepare My Business For Sale?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3],"tags":[],"class_list":["post-29","post","type-post","status-publish","format-standard","hentry","category-qa-for-business-owners"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/posts\/29","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/comments?post=29"}],"version-history":[{"count":4,"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/posts\/29\/revisions"}],"predecessor-version":[{"id":70,"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/posts\/29\/revisions\/70"}],"wp:attachment":[{"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/media?parent=29"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/categories?post=29"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.askprivateequity.com\/index.php\/wp-json\/wp\/v2\/tags?post=29"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}