Exit Options: Third Party Sales

If you don’t have suitable successors among your family or employees, you may decide to sell your business to a third party. In order to maximize your selling price, you must develop a step-by-step plan that increases the value of your business so that it is as attractive as possible to prospective buyers.

If you are selling a Main Street business (under $2,000,000 sale price) you seriously need to understand the market. We are entering the most challenging period for business sales in history. Over the next 20 years, expect 150,000 owner retirements per year. Intermediaries (brokers, private equity and M&A) account for only about 9,000 transactions a year. That leaves a lot of folks looking for a way to cash out.

Selling to a third party requires that you have your internal house in order. Many variables can derail a lucrative sale, including:

  • Financials that don’t support the asking price
  • A business that looks outdated, unkempt
  • Inability to structure a deal that works for all parties
  • Key employees that aren’t locked in
  • Procedures and processes that aren’t documented
  • Depreciation recovery
  • Build In Gains (BIG) taxes
  • Vendor and customer approval rights
  • Inventory valuation issues

Ready… Set… EXIT!

The tsunami of Baby Boomer retirements we will reach a peak of nearly 500 unsold businesses a day within the next 5 years. The statistics are immutable. That means you will inevitability be competing to sell your business in a buyer’s market. When considering an exit from your business, you have only five choices.

The first is to simply ignore it and hope for the best. The second is to watch, and wait for an opening. The third is a planned liquidation. The fourth is to build your own internal exit plan, and execute it without the unknowns involved when taking your business to the market. The fifth is to build a business suitable for sale in a highly competitive environment.

To sell to a third party, a company must have strong systems, dependable revenues, accomplished management (not including you), and profitability greater than most other companies a buyer might consider, whether they are in your industry or not.

Can’t find that third party that can take your business forward?  Let’s talk!

The bottom line is that with each passing day, another 500 businesses go on the market. You need to take the time to put together a plan that builds value if your company even has a chance of being attractive to the next generation of buyers. Want to know where you and your company stand? We can help. Click here to schedule a free consultation, or here for our general inquiry form.

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