Operating company is a huge responsibility that often requires far more than a full-time commitment and ongoing financial investments. People often sacrifice their personal time and their resources to establish or improve a business or professional practice.
Once it becomes successful, they can then reap the benefits of those prior efforts. The company may start generating substantial profits and may have a trusted brand that local consumers seek out for certain products or services. That company can continue to generate revenue for the entrepreneur or owner if they sell the business to someone else. Ultimately, before selling a company, there will be a few very important steps that a business owner needs to take to maximize their return on their original investments and efforts.
Identify and correct liabilities
There’s something to be said for passing on depreciated machinery to a new owner and letting them replace it over time. There is also real value in addressing minor issues, like cosmetic problems with a facility or small loans, that could diminish the overall value of the company on the open market. Getting the business into optimal operating condition and minimizing what obligations will pass to the new owner can be savvy moves for entrepreneurs hoping to maximize the asking price for the business.
Conduct a careful valuation
There are multiple different ways to establish a business’ value. Professionals look at the current revenue of the company, countable assets and other factors, like its reputation with the community, to estimate what the business is actually worth. The depreciation of resources and ongoing liabilities, including debts, will diminish the business’s value, while resources and a positive reputation may increase it. Having an understanding of what the company is worth will help someone more effectively negotiate a sale price.
Consider the transition
To make a business’s purchase as appealing as possible to an aspiring entrepreneur or new owner, the current owner will often need to offer hands-on training as a form of transitional support. From introducing the new owner to staff members to helping them take over day-to-day operational tasks, there will be many ways in which the current owner can help smooth the transition after the purchase. Oftentimes, a commitment to stay on for six months or longer after the sale can reduce the likelihood of the business failing immediately after the transfer of ownership and can help an entrepreneur feel more comfortable about moving into an industry in which they may not have any direct experience.
Business owners who understand what their company is worth and what will appeal to prospective buyers may have an easier time selling their business quickly and for the maximum amount of money possible. Preparing for the sale of a business can often take many months but can return significant dividends at the end of the transaction as long as the process is approached in a thoughtful way.