By: Certified Business Advisors Jim Fletcher, Wenatchee
SBDC and Linda Johnson, Yakima SBDC
Every year hundreds of businesses owners try to make a
successful exit by selling their business. Of all who try, 20% are in the best
position to find qualified buyers and receive a full offer, 30% fail completely
and sell for a liquidation value, if anything. That means 50% of all who
try could do better.
 |
Do you have a plan to sell your business? |
Our goal is to help that 50% get a better outcome.
Planning to sell includes a review of existing financials, preparing a business
value assessment and identifying business improvements and actions that can be
implemented over the next two to three years to improve the business value when
it’s time to sell.
Why are business sales so difficult to finance?
The recession and lack of a meaningful recovery has taken its toll. There
is less buyer’s equity to invest. In recent years, too many businesses
are chasing too few or a limited number of buyers and financial
resources.
In some cases, businesses attempt to keep taxes low and
deduct as much as they can, sometimes showing (on paper) a loss to the business
each year. A bank is hesitant to finance a loan for a business that shows a
loss. In other situations, a business may be made up of intangibles or 'blue
sky' that are difficult to determine a value.
If an owner does want to sell the business:
They need to focus their time and energy creating a business
that buyers will want. This means working on:
A. Profitability.
B. Competitive edge - to stay profitable.
C. Sustainability - to survive economic downturns.
D. Scalability - so the business grows.
E. Business culture - so good employees stay.
F. Most efforts to transition a business fail because the
owner remains an entrepreneur, not a manager.
Business Exit Planning = systematic process.
Goals:
- Maximize Business
Value.
- Maximize
the number of Possible Transition Models Available.
- Minimize
Cost to the business owner.
The process helps identify:
- Real
transition opportunities
- Business
strengths and weaknesses.
- Risks
to a successful exit or succession.
- Needs
of both the business and the owner, now and for their life after business.
- New
wealth opportunities: keeping businesses successful and local.
Cost: There can be costs for an outside
planning-level evaluation. Clients may choose to use their own accountant
or recommendations can be provided.
Advising services of the SBDC are at no fee and confidential.
For more information contact:
Jim Fletcher, CBA, ABPA at 509-888-7252; jim.fletcher@wsbdc.org
Linda Johnson, CBA, ABPA
at 509-454-7612; linda.johnson@wsbdc.org
Or contact your local SBDC office in Moses Lake,
Okanogan, Pullman, Spokane, Tri-Cities, Walla Walla, Wenatchee or Yakima.