Efrain Conrique and Associates
Business Valuations

When You Are Selling a Company

Business owners decide to sell for a many different reasons. For some, it is primarily an instinctive conclusion inspired from a need to resolve problems or a desire to capture opportunities. For others, it may be a judgment motivated by pursuit of long range business or estate-planning goals.

Whatever the motivation, implementation of strategic plans is the most important element for positioning the company being sold so as to obtain the best benefits. The best outcome is realized when the owner implements, a couple years in advance, strategies that maximize value when the business is sold.

If you plan to sell your company in the future, a combination of strategies should begin to be considered and implemented in a methodical way to maximize the company’s marketability and value:

1. Position the company to improve its marketability. Look at your company from a buyer’s perspective and make necessary adjustments. Is the company ready to offer new products or services to the marketplace? Are the company’s facilities and equipment capable to accommodate expansion and is the remaining management qualified to achieve gains in market penetration? A company is more appealing to buyers if they think they can create value in the purchased business after the acquisition is completed.

2. Focus on profit and growth. Many companies focus on minimizing taxes rather than on maximizing income. However, from a buyer’s perspective, higher incomes and growing profits minimize risk and make the company more desirable.
Increasing trends in a company’s income and profit levels substantiate the company’s ability to make money in the future and significantly increase its sale value.

3. Produce valid financial statements. Make sure your financial statements are accurate, timely and professionally prepared. Prospective buyers will conduct a thorough due diligence investigation of the business. If existing financial statements are factual, the confidence level of the due diligence team and the likelihood of a successful transaction are greatly enhanced.

4. Develop the depth and quality of your management team. The composition and quality of the management team is a key concern for buyers, especially since it is normally expected that the owner will not stay long after the sale. Even if it seems counter-intuitive, take steps to de-emphasize your own value in the eyes of the prospective buyers and strengthen that of your management team.

5. Build relationships early in the process with good professional advisors. Your CPA, Management Consultant and attorney are very important in helping you to posture the company for greater sale value and marketability. The selling process is not easy and it can be emotional and stressful, — and the assuring support of trusted advisors can be invaluable. Also, when negotiations become difficult, your advisors can step in and protect your interests.

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