Most of the time, stockholders will only start their way out of the business until the stocks are ready for selling. But bear in mind that inadequate planning at the present may lead you to lose more when you finally decided to sell it all out. Remember to keep track of the below practices in planning for your way out.
1. Make sure your key employees are incentivized
Top managers can usually generate enormous strife of interest at the time of the sale while stockholders become their hostage in the middle of the negotiation process. These managers are not sole stockholders. To prevent last-minute power play, see to it that at the moment they were given adequate incentives such as sale bonus or stock options program.
2. Establish key advisor relationships early
Well-established service providers could increase significant worth to a sale process- in fact. Build good relationships with a competent accounting firm, lawyer and investment banker or business broker at the present. And this indicates advisors with substantial M&A expertise and not just your family lawyer uncle Ira. The moment you finally decided to sell your stocks, these advisors will provide you good advice for they have appropriate perceptions and information for the said matter.
3. Get rid of “private company” expenses
Most of the private companies operate in order to lessen taxes for shareholders. Nevertheless, the goal of selling the business is different because we are aiming for higher profit as much as possible. We recommend that 1 to 2 years before the selling of the business, it is necessary to reduce non-business-critical expenses (such as the annual “company conferences” in St. Bart’s, etc.) in the business operation.
4. Get your numbers into shape!
The company’s worth is determined primarily by its financial statement. On the other hand, several businesses likely incur lesser credibility because of having total disaster financials. Audit the last 2 years of your financial statements if you obtain greater than $5 million earnings. Financials of those small companies must be examined by a reliable accounting firm (again, not cousin Gladys the CPA). Through this, the company’s financial operations/controls weak points and other possible problems will be identified and will be rectified in due time.
5. Run a tidy “house”
Most of us want a smooth housekeeping every now and then. In the same manner in business, holding disorder records will cost you a certain figure. Most buyers will put penalties. Having more administrative items that are in disarray will lead to incurring more penalties from the buyers. See to it that all of the company’s files are properly organized and recorded. Also, files must be regularly examined. Make sure of keeping tab of specific articles provision such as change of control provision that may possibly affect the future sale.
6. Create a growth plan
Even if you are now prepared in your way out of the business, make sure to establish the business accordingly, that it must appear to have more potential to offer in the future. Take note that buyers will not acquire a business that is set up to begin its downfall or even business with no possible progress. See to it that you will be able to establish good credibility of the company, which will support your claim in providing a minimum of 3 years’ substantial increase in profit after the sale.
7. Keep Your Sale Plans to Yourself
Make sure you have a non-disclosure or confidentiality agreement when you do share your sale intentions with key staff and outside consultants. Stress how important it is to keep your sale intentions private even if you’re dealing with your financial and legal advisors. Your employees, customers, and suppliers might start worrying if the word gets out that you plan to sell your business. This could devalue your business when what you really needed is to increase its worth.
Consider consulting a financial advisor if you’re planning to sell your business to help maximize your earnings and/or avoid unnecessary mistakes. A financial advisor must help protect your identity and maintain anonymity while seeking potential buyers. Another reason why it’s best to consult a financial advisor is that you will still need to focus on running the business and let the objective experts skilled in negotiation and deals do the work. A good advisor will help add value to your business.
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