Follow Dallas Linkedin
Email Dallas Email
Financial
Oct 15, 2020

The Process Of Selling Your Business Has Already Begun

Sponsored Content provided by Dallas Romanowski - Managing Partner, Cornerstone Business Advisors

When you started your business, it was probably obvious that you needed a plan. It may be less obvious, though, that when you leave your business, no matter how you do it, you’ll also need a plan. The reality is that every action you take during the life of your business has an impact on your departure down the road.
  
Getting Full Value
 
No matter who you decide will be your successor in the business, you will most likely want to build value in your company. Third-party buyers or investors will tend to look at objective, quantifiable facts when deciding how much to offer for your business. Employees, family members, and co-owners will want to feel confident that they are taking over a healthy and stable enterprise.
 
Buyers compare the relative strength of your company’s value drivers to those of your competitors. They commonly look at all of the characteristics to ensure your business is a well-managed operation.
 
Businesses that plan ahead to build their value drivers early may carry less risk. Being deficient in just one or two value drivers can impact business value or deter potential buyers. This realization may come as a shock to many business owners. Even if the business is profitable, they may have overlooked some important value drivers.
 
This Process Takes Time
 
Implementing strong value drivers is one thing. Having the ability to sustain and grow each area over time can demonstrate the strength of your business and the potential growth it represents. Buyers may also want to confirm that a company’s value drivers are not temporary or short-term. By demonstrating the strength and stability of the value of your company, you may be able to boost your sale price, streamline your exit process, and find the right successor on your timeline.

We know change takes time and results can fluctuate over the years. Buyers keep this in mind and can appreciate steady growth. It’s a good idea to keep your value drivers in check and constantly review your progress years before you think about selling. The idea behind a value driver is that it can improve cash flow, expand your competitive advantage, and/or grow your business.
 
Bonus Perks 

Not only can enhancing the value of your business greatly assist your exit strategy, but it may also help you in other ways. When unforeseen circumstances arise, you won’t need to worry as much of the health of your business with strong drivers in place. Unexpected changes may not shake your company’s performance. Value drivers that cause the business to run more efficiently can also give owners more time in their days.  Finally, when you concentrate on improving your company’s value drivers, you may find yourself exploring strategies that you may have otherwise ignored, such as growth through acquisition.
 
Common Value Drivers
 
Consider the following important value drivers common to many industries and some ways you might leverage them.
 
A Stable and Motivated Management Team
 
You may benefit from an incentive compensation system that is either cash or stock-based, and rewards key employees based on how the company performs (usually measured by increases in pre-tax income).
 
Operating Systems That Improve Cash Flow Sustainability
 
Investigate technology stacking options that streamline and connect different systems and processes, with integration that can allow you to demonstrate to a buyer that the business can continue (and grow) profitably after the sale.
 
A Solid, Diversified Customer Base
 
It may be possible for you to expand geographically or purchase the customer list of a competitor that is closing its doors.
 
A Realistic Growth Strategy
 
Develop a written plan describing future growth and how that growth will be achieved based on industry dynamics, increased demand for the company’s products, new product lines, and other expansion plans. Then share the plan with a trusted advisor or investor who can help you identify weaknesses in the plan so that it can be improved.
 
Effective Financial Controls
 
Upgrade to audited financial statements to get the scrutiny of trained professionals. Alternatively, engage an independent firm to conduct a quality of earnings report, verifying the sources and consistency of your income.
 
Stable and Improving Cash Flow 

Ultimately, all value drivers contribute to a stable and predictable cash flow. It is important that your company’s cash flow remains substantial and continues to grow, especially in the two or three years preceding the sale of the business. You can begin working to increase cash flow today by identifying ways to operate your business more efficiently by increasing productivity and decreasing costs. Many business owners find that eliminating their least profitable products or services can free up attention and capacity for more profitable areas.
 
Installing value drivers in your company might be one of the best things you can do to increase the salability of your company but doing so takes time. The clock is already ticking!

We strive to help business owners identify and prioritize their objectives concerning their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.
 
Welcome to Cornerstone's Exit Planning newsletter. We'll provide you with practical tips on planning your business exit twice a month. Click here for a complimentary planning assessment. Contact us with any questions or to help get you started with the planning process. Enjoy!

Dallas RomanowskiChip Mayo, and Mike Leannah

© Copyright 2020 Business Enterprise Institute, Inc. All Rights Reserved

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisers who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. As a member of the Business Enterprise Institute (BEI), Cornerstone is an authorized distributor of BEI’s content and Exit Planning Tools. We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit www.launchgrowexit.com, call (910) 681-1420 or email [email protected]
 

Other Posts from Dallas Romanowski

Bizjournalblockad
Ico insights

INSIGHTS

SPONSORS' CONTENT
Web awstaffpic2020 1 132245438

The Luncheon for Literacy: More than a Meal

Alesha Edison Westbrook - Cape Fear Literacy Council
Mc2 56882

Landing Whales Requires A Larger Ocean With More Food

Scott Byers - Majestic Kitchen & Bath Creations
Burrus rob headshot 300x300

Economics: The Inflation Surge

Robert Burrus - Cameron School of Business - UNC-Wilmington

Trending News

Holly Childs Resigns As WDI Head

Vicky Janowski - May 26, 2022

Aswani Volety Named New UNCW Chancellor

Johanna Cano and Johanna Still - May 26, 2022

Wilmington-based Realty Group Announces Changes

Cece Nunn - May 27, 2022

Firm To Convert Offices To Warehouse Space After $6M Purchase

Cece Nunn - May 27, 2022

WilmingtonBiz Talk Previewing Summer Tourism Season

Vicky Janowski - May 26, 2022

In The Current Issue

Local Startups Aim To Innovate

Innovation helps set a startup apart from the competition, said Heather McWhorter, regional director of the UNCW Small Business & Technology...


Info Junkie: Aariene Hansley

Aariene Hansley, entrepreneurial academy education coordinator at business development firm Genesis Block, shares her top info and tech pick...


Owners Taking Fermental To New Level

Fermental is one of Wilmington’s more unique watering holes – a bit quirky, but home to many loyal patrons who appreciate its laid-back atmo...

Book On Business

The 2022 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

Trying to Grow a Business?
2020 Health Care Heroes
2020 WilmingtonBiz 100