Good to Great: How to Scale With an Outsourced CFO

What’s your business worth? Have you thought about selling it?

 

No one wants to work forever. And even if you’re not ready to retire, perhaps you want to focus on a new project. Better yet, maybe you can sell your business for an impressive profit and use the proceeds to launch your next big idea.

 

Whatever your motivation, the timing of your company’s sale is critical. In this article, we’ll look at some of the factors you should consider when timing the sale of your business.

 

Industry Climate

If you have accurate information about your industry, you’re more likely to make the right decisions regarding the sale of your business. Understanding your industry’s strengths, challenges, participants and innovations will allow you to better capitalise on opportunities as they arise.

 

You can perform market research on your own through online directories and trade journals. Talking with your business adviser will also help you to stay informed with your industry’s ups and downs.

 

Just as you don’t want to sell your home when your neighbours are trying to sell, you’ll also want to avoid selling your business when there’s a glut of similar companies on the market. By staying tuned, you’ll know when the time is right.

 

The Condition of Your Business

Sometimes, however, the market may be perfect for selling, but your business isn’t in great shape. For the best price, you’ll want to offer a firm with dynamite employees, the best possible clients, finely-tuned processes and fantastic cash flow.

 

Not quite there yet? No worries. With a little work, you can bring your company up to speed. And if it doesn’t sell right away? With a company like that, maybe you’ll reconsider selling in the first place.

 

How do you know if your company is in good condition?

 

Start with a Valuation

Most business owners aren’t sure how much their company is worth. Without this crucial information, it’s challenging to make critical decisions about pricing and terms.

 

With an outside valuation, you can determine whether or not your actions are directed at maximising shareholder and enterprise value. Even if you decide not to sell right away, an accurate valuation is invaluable to secure financing and optimise your tax situation.

 

Calculate the Risks

It’s nearly impossible to anticipate all possible risks associated with a business sale, but it’s not difficult to prepare for the most common ones.

 

Reach out to your business advisor for assistance with determining this intangible factor. An independent accountant and business broker can help you to prepare for possible risks such as over- or underpricing the business, running into regulatory issues and managing expectations.

 

Attracting Big Offers

Another factor to consider when timing the sale of your business is your current ability to attract big offers. How can you make your company the most appealing? And what are potential buyers looking for?

 

Remember that buyers look at the total package:

• Product development
• Marketing
• Sales
• Fulfilment
• Support
• Administration
• Processes
• Cash flow
• Staff

 

One of the variables that tends to attract big offers is having a good management structure in place, including your board of directors. Buyers also want to see that a company still has an “upside” to go in terms of growth, that the business isn’t maxed out in a saturated market. Some buyers hope for a company that has a high barrier to entry or cannot be easily replicated. And the industry matters. Buyers love to see an expanding or niche industry where there’s plenty of opportunity for expansion.

 

Personal Timing

One of the toughest issues for business owners is aligning their business goals with their personal financial goals. At first glance, it seems that these two issues are the same. But when you start thinking about selling, you quickly realise that they’re very different.

 

Take the time to evaluate your own long-term goals. When do you want to retire? Will you have enough money for your desired lifestyle? What responsibilities do you have for your dependents? Do you have a plan for protecting your assets? How will the sale of the business affect your taxes?

 

Working through these issues with your financial adviser will help you determine the best timing for the sale of your business. To discuss these issues, or to ask questions about any other business topic, reach out to us at Altus. We’re happy to schedule a consultation to help you strategise and come up with a plan.