Larry Reinharz of Woodbridge International said, “If you have the majority of your net worth in your company and you are past the 7th inning of your earning years, timing the sales is crucial to your financial well being. The biggest mistake we’ve seen business owners make is waiting too long to sell. They do understand their company’s value is tied to profitability and growth and are bullish on the future…but they’re waiting for the “peak.” Based on our experience, no one ever knows when the peak is until six months after the fact(Reinharz,p.8).”
In the past several years , there have been a tremendous amount of emphasis on exit planning. The lesson for business owners that I take from the above statement by Larry is, it is never too early to begin planning for an eventual exit and that exit opportunity can come at any time, especially to those companies that are ready.
The question becomes, how can I make sure my company is ready to take advantage of an opportunity? Even more importantly, how can my company beat the competition for investor dollars? Below are four points I highly recommend.
• Educate yourself– Attend seminars(e.g., The Business Sales Solution), read books (e.g., The Exit Strategy Handbook, A Tale of Two Owners) and talk to respected professionals that you trust.
• Build a Team of Professionals– Talk to and build a team of professionals that will help you get the highest value for your company. Beware of using friends that are not top professionals. I have seen this destroy exits. Use only the very best and make sure it includes the following:
o Team Manager
o M & A Company
o Tax Specialist
o IT Specialists
o Wealth Manager
o Insurance Advisor
• Have Clean and Accurate Financial Statements– “The good news is that accurate and timely financial statements are something you can obtain. For some of you it will take more time and money than others, but it can be done and is crucial to getting a deal done for maximum value(Krier, p.16).”
• Start Due Diligence Now– Business owners are often shocked by the amount of due diligence work a potential buyer will engage in once the process begins. It can be overwhelming and can lead to distractions that gets the owner’s mind off the current business which can lead to decreasing value and can lead to no deal in the end. Do not let this happen. Start a process and a data room that will set your company apart from the competition and lead to a higher price.
*Green, Lori, Editor, (2018), How to Best Market Your Mid-Size Business For Sale