For most entrepreneurs, selling their business for a sizable profit is the goal right at the outset. It’s a great plan and one that can provide the capital needed to invest in a new project or to start a well-deserved retirement.
But whether this is something that you might be considering now or in the long term, there is no time like the present to get your business ready for sale.
But what exactly does that mean and more importantly, what does that look like from a financial management point of view?
The best way to assess whether your business is ready to sell, is to take a look at your business through the eyes of a prospective buyer. Here is a list of the top things we recommend you assess and a few questions you should most certainly ask yourself.
Good quality financial record keeping.
It seems obvious, but too often not enough attention is placed on producing good quality financial statements let alone being compliant with tax authorities. But the level of care you give to your back office provides prospective buyers some assurance that you give the same level of care to the rest of your business.
Think of this way, if you were approached by a prospective buyer today, would you be able to produce the materials required for due diligence with some degree of ease?
Revenue and EBITDA trends.
Prospective buyers will want access to trends in your business, both from a revenue and earnings perspective. Would you be able to produce this quickly, and with a high degree of accuracy, if you were approached by a prospective buyer?
Economic Dependence.
This is a common issue in service businesses whereby a high concentration of revenue comes from 1 or 2 clients. Ideally no one customer would represent more than 15-20% of your revenue. Wherever possible, try to diversify your revenue to be attractive to buyers.
Systems and Procedures.
We know how much most creative businesses LOVE process, but the best managed firms embrace and use processes to remove friction in businesses and improve their scalability. This includes having well documented core processes so that any prospective buyer could continue post sale if they chose to.
Does your business have repeatable process that could be easily continued with success post-sale?
At Fin/Ally, we work with growth oriented creative businesses who are serious about their financial performance to professionalize their accounting product, provide good visibility to historical and future performance and to develop and document effective and scalable accounting processes. All for a fixed monthly fee.