Thinking About Selling Your Business? Five Key Areas to Focus On
Chase Busenbark
First Choice Business Brokers
Greetings, Slippery Rock readers! Allow me to introduce myself. I’m a business broker specializing in connecting buyers with sellers across the country. With a background in business management, operations, and expansion, I bring valuable expertise to the table. My roots in the flooring and countertop industry run deep, thanks to my family’s longstanding presence. For eight decades, we’ve operated a flooring company, alongside a stone fabrication shop for the past two decades, employing approximately 100 individuals. Given my history, I dedicate much of my attention to aiding stone shops in selling their businesses.
In this article, I’ll walk you through five essential steps to determine if your business is ready to be sold. It usually takes a few years to get everything ready to be marketed – so start now!
1. Prepare your business to be sold as a whole entity, not just you. While you can influence your profit, you can’t control the market’s valuation. For instance, consider two businesses in the same industry, one making $100,000 and the other $300,000. The business with higher seller’s discretionary earnings will likely fetch a higher market value.
And the less your business relies on you personally, the more attractive it is to potential buyers. Consider how your absence for a month would affect the business. Processes, teams, systems will help remove the “you” factor.
2. Organize your financial records.Many business owners neglect proper financial management, leading to messy records. A business owner needs to start this process 3-5 years in advance of wanting to sell. And sometimes I run into a business that just simply does not use financials to make decisions in their business – usually these are the smaller shops.
Just remember, if it’s difficult for an analyst like me to understand, it will be challenging for a potential buyer, too. Regularly track your financials either with the help of an external professional or dedicate this to someone in-house. A consistent financial track record instills confidence in buyers.
3. Consider the diversity of your client base. Address any issues related to customer concentration, wherein a single customer contributes more than 10% of your revenue. Heavy reliance on one client poses a significant risk to your business’s stability. Diversify your customer base to minimize this risk, and it will instill confidence in potential buyers regarding the business’s future performance.
4. Justify your business’s value. Work with a team to determine a fair market value for your business and be ready to defend it. Have all your due diligence documents organized and transparent. Validate any adjustments or “add backs” made to your financial reports to accurately represent your business’s profitability. [Addbacks are when a business expense is $5,000 on your financial reports, but the true expense is $3,000. Which means $2,000 gets added back to the bottom line.
5. Plan for life after selling your business. Transitioning from the busy day-to-day operations of a business owner to your newfound freedom can be a significant change. Don’t underestimate the adjustment period. Deciding to sell your business will be one of the most difficult decisions you will face as a business owner – and selling your business will require your full-time attention. It will be tough keeping the business at optimal running speed while dedicating time to prospective buyers, answering questions, and keeping your daily tasks up, and your staff on even ground. You have to focus on keeping your business profitable while also navigating the sale process – but the payback for all this work could be the freedom of retirement or your next adventure.
Addressing these 5 key areas will improve your chances of selling your business quickly and profitably when the time is right. If you’re curious about your business’s value, contact me for a complementary market price valuation at chase.busenbark@fcbb.com.
Chase has worked in the natural stone industry for 20 years and has been in the shoes of an owner of a stone fabrication company. He’s taken the shop from a manual shop to completely digital with one dual sable sawjet, a single table sawjet, 3 routers, and multiple line polishers. He has also implemented paperless scheduling, quoting, and work in progress software for the business as well. Chase has worked as a business broker with many business owners in the stone industry to help them sell their business.
Send any comments and questions to chase.busenbark@fcbb.com .