A lot of business owners frequently put their blood, sweat and tears into a business over many years with the hope of giving a good existence for their family members and one day retiring on the heels of selling their business. Tens of thousands of business owners will make the decision to sell this year. Unfortunately, a great number of business owners will be behind the proverbial eight-ball if succession planning enters their thoughts for the first time at the moment they make a decision to sell. In reality, owners ought to start planning their exit from the first day of operations. Five years before the sale is the second best response as it will give owners the time necessary to bring their business to a valuation level required to obtain their retirement targets. At the very minimum, business owners need to think about their business exit planning three years before they want to sell.
Many owners have no idea as to the suitable time to sell their business. The answer to this may come in the form of one’s retirement goals or wishes. This is where a good certified financial planner can be of assistance. They can help an owner ascertain how much money is essential out of the sale of their business in order to attain their desired goals.
Soon after meeting with a certified financial planner, the next logical step is to figure out the current value of the business. This is exactly where a professional business broker can be of tremendous benefit to an owner. Most business brokers are happy to sit down with an owner and perform a business valuation. Our business brokerage firm, which is located in West Chester Pennsylvania just outside of Philadelphia, does free valuations or “opinions of value” all of the time. If a company is valued at the price that accomplishes the owner’s objectives, then they may be capable to sell instantly. If the value is lower than what is required, then the owner has to be of a mindset for raising the price tag of their company and taking steps to make sure that occurs.
One item that business owners need to have in order before they sell is the business books and records. Prospective buyers and banks will want to see at the bare minimum three years of books and records. Appropriate and accurate books and records instill assurance in both a buyer and the financial institution. At the very least, a business owner should have current and complete profit and loss statements, balance sheets and tax returns over the prior three years.
In conclusion, owners should be thinking about their exit plan way in advance of their actual anticipated selling date. The sooner business owners think about exit planning the better. Business owners really should consider an exit planning strategy from the very first day of operations, if not at least 5 years before they want to sell and at minimum 3 years before they want to sell. It is highly crucial to have accurate books and records for at the very least three years prior to selling. Owners should align themselves with the applicable experts to aid in what might be the most important sale of their lives; a business broker, certified financial planner, business lawyer and accountant are instrumental in assisting owners with successfully exiting their business.