It’s been reported that between 7 and 10 million businesses will be up for sale in the next several years as Baby Boomer owners retire (or die). The book entitled The $10 Trillion Opportunity expects $10 trillion to change hands in the next decade or so from the sale of these businesses. If you’re planning on selling your company within this time frame, make sure you are positioned to get the most you can in light of the number of other businesses for sale.
Get your financials in order
You won’t be able to get a good valuation or speak with prospective buyers unless you know where you stand from a numbers perspective. Your business may be humming along and you may be taking out a comfortable amount each month, but that doesn’t speak to the financial condition of your business.
Work with your CPA to:
- Create a P&L statement, which is a report of your income and expenses. As long as your revenue exceeds your expenses, you’ll show a positive number (a profit).
- Create a balance sheet, which is a net worth statement for your business. It lists your assets, liabilities, and owner’s equity.
- Review your debt. How much do you owe and when do you expect to have this paid off?
Do a valuation projection
A formal valuation by an expert usually costs thousands of dollars, and you may need to invest this money when you plan to sell. But before then, you can get a good idea about what your company is worth with some informal valuations. Here are some calculators you can use to get a general idea about valuation:
Think about your customers or clients
For some business owners, they are the company in the eyes of their customers/clients. No owner, no company. If this sounds like your situation, it can be turned around by developing relationships between customers/clients and others in your company. This takes time and requires communication with customers and clients. Get started now.
Develop a succession plan
While millions of owners are set to retire, the percentage of those with formal succession plans is very low. One source says only 25% of Boomer owners have begun to plan for their exit. Work with an expert who can help you identify some of your concerns (e.g., target date, valuation).
For many business owners, death is their only exit strategy. But for many others, it makes sense to plan for a profitable exit so they can enjoy what they’ve created. Those who plan to continue working indefinitely still need to address succession planning so the business can continue (with ownership passing to their children, their employees, or others) after their demise.