Entrepreneur: December 2013: Ask The Money Guy Q&A

Entrepreneur: December 2013: Ask The Money Guy Q&A

Question: I’m going to sell my business and retire. Anything I should know? Sorry to break it to you, but it’s becoming a buyer’s market for small businesses, and the fat payday you were banking on to fund your house on the golf course may be significantly smaller than you expected. To help makes sense of why? y. and what you can do about it?I turned to Jerry L. Mills, author of The Exit Strategy Handbook. Here’s what he had to say. WHAT’S GOING ON WITH SMB SALES? A huge number of baby-boomer business owners will soon be aging out of active involvement and exiting their businesses. Conservatively, we can expect the number of smallbusiness sales to increase by a factor of 10 to 15 over the next 15 years, a glut that will drive down valuations sharply and create a buyer’s market. OUCH. WHAT CAN OWNERS DO ABOUT THIS SITUATION? Prepare for that exit now. Learn what your exit options are?including, but not limited to, the sale of the business?and get help. This isn’t something you should figure out on your own. You have a company to run. WHO CAN HELP GET THE BALL ROLLING? The answer depends on the size of your company. A large company ($50 million in revenue and up) should consult with a mergers and acquisitions firm or an investment bank. But every business owner should talk to an attorney who deals with company sales, a business valuation consultant, their banker, tax specialists, the accounting firm responsible for company audits, an IT specialist (if the company uses a proprietary system), key employees and an insurance advisor. And talk to your personal financial advisor as well. SOUNDS LIKE YOU’RE ADVISING PEOPLE TO DO EVERYTHING NECESSARY TO SELL THEIR BUSINESS, BUT NOT PUT IT ON THE BLOCK. WHY GO THROUGH THIS EXPENSE NOW? It’s important to know the value of your business to see if it will be sufficient to fund your retirement goals. The more time you have to grow your business to meet those Learn what your exit options are and get help. retirement goals, the better. Plus, there are many methods used to value a business, and the exit option you choose matters. For example, if you sell to your employees through an employee stock ownership plan, then you must use the fair market value method of valuing the business. This method is prescribed by the IRS and is much lower than the deal you might get from an outside buyer. WHAT CAN MAKE A BUSINESS MORE ATTRACTIVE TO BUYERS? Prepare and keep your financial records and inventory audits ready for the due diligence process. Making this time-consuming and costly process easy for a potential buyer can mean the difference between completing the sale or not, and it can also positively affect your company’s value at closing. A LONGTIME CFO, JOE WORTH IS VICE PRESIDENT OF OPERATIONS AND PARTNER AT B2B CFO. @B2BCFO_NJ