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Where Will You Be Five, 10 Years From Now? Part 2
The International Institute of Business Brokers reports that 20 percent of small businesses are transferred in ownership or go out of business every year. The last issue of Growing Possibilities discussed how exiting from a business takes a lot of planning. Planning involves considering your personal goals, your family, your employees and your finances.
Get the most money from your business. If you know what your business is worth, your sales expectation will be realistic. Take steps early to increase its value and continue monitoring its worth over time.
Here is how you can prepare:
- Develop a plan. Know when and how you will sell or transfer your business. If you set the conditions for its sale, you will know when the opportunity is right. It will be a solid business decision rather than an emotional one.
- Protect yourself from tax liabilities. Use proper business and personal insurance products to safeguard against sudden and unforeseen situations. If you are involved with partners or a family business, it is even more critical to handle potential problems in advance. Consult an attorney and financial planner for the right agreements and products.
- Operate under the right legal structure. To protect your assets, and make sure your business is saleable, be sure it is structured appropriately. For example, if you have partners or family in the business the growth and structure requirements will be more complex than as a sole proprietor. Build the foundation with the end in mind so that ownership will transition easier.
- Know the true value of your business. Make sure the valuation is conducted by a professional who has experience assessing a business's financial worth. Most business owners think it is worth more than it is. They do not have the experience and are too biased to value their own company. The information you get from a formal valuation will help you understand which areas need to be strengthened for future options.
- Make necessary business changes. Optimize your business's sale value by evaluating its weaknesses early and deciding how to eliminate them. Professional consultants can suggest changes that will make your business more appealing to buyers. These suggestions may include acquiring more large customers, making key management changes or decreasing your debt percentage. Be open to making your business more attractive to buyers.
Preparing for the final stages of owning a business can ensure that your exit is filled with pride and satisfaction versus sadness and disappointment. When your reign in the business ends, make sure you see other opportunities and experiences before you. Your life is not over, it is just different. You might be surprised how free and exciting a well-planned retirement or work change can be. If your initial plan doesn't work for you, there is always another business that needs a caring owner. Good luck!