So how do you recognize the time when you can sell high?  Here are some clues to help you recognize it:

1. The past three years show rising sales and cash flow.  Your financial reporting system is detailed with reporting capabilities that track key indicators in your business, ratios that benchmark superior performance, and calculations that document compliance with loan covenants.  Depending on the size of your business you have reviewed or audited statements from a professional accounting firm that bring credibility to your results.
2. The market for your products and services is growing, you are well positioned to capitalize on the potential, and you have research to support that claim.  You know what your competitive advantage is and have a marketing plan that details your strategies to beat the competition.
3. You have an empowered management team that is actively running the business.  Protections and incentives have been put in place to reduce the threat of employees leaving with your intellectual property or customer base.  You work reasonable hours and are able to take time away from the business.  There is an organization chart with clear lines of authority and responsibility.
4. There is evidence that your people, which you claim to be your most important asset but which you do not own and cannot sell, are committed to and likely to stay with the company.  This can be documented by high sales to employee ratios versus the industry, low turnover ratios, records of training and investments in personnel, clear personnel policies, employee recognition and incentive programs, etc.
5. You have made it a priority to minimize sales concentration with any one customer and have diversified your supplier base to reduce exposure.  Your customers have relationships with people in the company other than yourself and you can produce documentation on customers such as length of relationship, sales by customer, customer intelligence information, and customer feedback and surveys.
6. You have documented your intangibles such as your processes, systems, and methods.  There is a list of your intellectual property and it has been copyrighted or otherwise protected.  You have carefully reviewed contracts and sought to preserve assignability whenever possible to enable transfer without third party approvals.
7. You have a list of tangible assets and a schedule for planned replacement.  You maintain accurate inventory measurements and have management systems to monitor and control inventory.  This is confirmed by strong turnover ratios compared to industry benchmarks.  Obsolete inventory is sold, donated or liquidated.  Your facility is clean, organized and attractive in appearance.
8. You have maintained a strong relationship with an accountant, attorney, banker, insurance agent and others that think highly of your business and would want to continue to do business with your company after your departure.
9. You have a written business plan that ties in with all of the above and shows where the company wants to go in the next five years.  Managers are familiar with the plan and regular meetings are held to review progress and update the plan.  The plan was presented to and approved by your Advisory Board of outside advisors that bring varied perspective and expertise to your company.

The present environment would have to be a terrible time to sell – right?  Value is a function of cash flow, perceived risk, and supply and demand.  If the above describes your company, your cash flow is strong, risk has been minimized, and the number of other businesses for sale that are as attractive as yours are very few.  We receive emails every day from private equity groups looking for attractive investments.  Corporate managers are getting laid off in high numbers and many will be adding to the ranks of individual buyers.  And while banks have tightened their criteria, they are still seeking to make loans for solid business ventures.  Meanwhile, many companies have flat or declining sales and profitability and do not have a strong selling scenario.  So if you have maximized cash flow and reduced risk, properly marketing your business to take advantage of the current lack of supply of good opportunities may produce an excellent result, even in this market.     

 

What should you be doing in the meantime?  Striving to build the kind of company described above.  The more your company looks like this, the better the position you will be in to sell and get a premium deal.  Many people that approach us are tired, bored or burned out.  Why not put together a five year plan to prepare your business for sale and make that your last major project.  Even if you sell in two or three years, any progress you make and having a defined plan in place will increase the value of your business.  Let us help you prepare an exit plan to make the most of the final sale you will ever make – the sale of your business.  Part of this plan will be determining when your sale objectives can be met and what has to happen to meet them.