DALLAS – Dec. 17, 2007 – Homeowners won’t have much luck selling a house right now, but it’s an entirely different story for business owners. Despite recent credit market turmoil, owners considering a sale are finding a favorable climate. The cyclical mergers and acquisitions industry is very strong right now, and owners may receive 15 to 50 percent more of the company’s enterprise value in today’s market. 

Whether or not you’re considering the sale of your business, it’s always good to be prepared. Start off in the traditional New Year’s fashion—with a few resolutions.  Here are eight resolutions for 2008 that every business owner should keep in mind.

Get organized.  Well-organized company information and financial documents will make any company more attractive to potential buyers. Owners should make sure tax returns, balance sheets and income statements as well as information on the company’s customer base, suppliers and employees are up to date. Having these in place will help to increase the value of the sale and it will help the sale process move quickly, too.

Don’t try to do it alone.  There are many nuances to selling a business.  Enlisting the help experts such as lawyers, accountants, financial planners and bankers can help ease the load and ensure common mistakes aren’t made.  Their professional advice and experience can help you get the best deal possible, on your terms. 

Have a valuation.  Business owners may think they know what their business is worth, but more often than not, owners’ estimates are significantly askew. A company’s worth to a potential buyer is linked not only to assets like cash, inventory, equipment or buildings. Its worth is actually a combination of assets and goodwill (the new owner’s ability to make a profit in the future) and market conditions. A professional valuation done will determine the company’s enterprise value against all variables.  Business owners should make sure get a valuation update each year.

Know your buyers.  Owners often think they know who would be interested in buying their company. They likely think that the best buyer is a competitor, family member or current employee. This is usually not the case, and thinking so is limiting. Here’s why: many companies won’t pay a premium for a direct competitor—the likely already have the resources you do and therefore don’t need what you have to offer. Family members aren’t likely to give an owner the best price; nor are current employees or management. Potential buyers for any business are usually public and private companies, foreign buyers and private equity firms.

Make yourself more attractive to buyers.  When you’re selling your business, an owner is selling the future, not the past. Unfortunately, buyers aren’t interested in the long hours and hard work someone put into building a company; they’re interested in maximizing their investment.  One way to make your company’s future more attractive is to develop a forward-looking budget.  The more a buyer knows about the costs and income they can expect in the future, the easier it makes their decision.

Keep quiet.  Whether a business owner just thinking about selling his or her company, or they are deep in negotiations, when it comes to details of a sale, it’s always best to keep quiet. For instant, by letting people know the company’s enterprise value, the owner has set the limit in negotiating a deal.  Instead, he or she should let the buyers establish a starting point.

Also, consider this tale of a business owner who tells a trusted employee that he’s thinking of selling the company. The next day, the employee innocently tells a family member, who also tells a friend. A week later the business owner hears the rumors that the company’s for sale, creating uncertainty and uneasiness among clients and employees alike.  Either way, slipped information can hurt a business owner as a sale approaches.

Make plans.  A good solid succession protects the company’s future vitality of the business by ensuring a smooth leadership transition. For that reason, it gives both sellers and buyers peace of mind.  A buyer wants to know that after the sale, there will be someone available who knows how to operate the company and has relationships with clients and distributors—permanently or at least through the transition phase.  

Additionally, since business owners’ personal net wealth is often tied to their business, those seeking to maximize the influx of wealth after a sale also should consider creating a wealth plan. And a preliminary wealth audit can help owners decide if they’re even ready to retire and what sale value is necessary to maintain their lifestyle in retirement.

Have patience.  Throughout the entire process of selling a business, patience is a virtue. The process of evaluating a business, bringing it to market, finding the best buyers, negotiating and closing a deal, and transitioning it to the new owner can be a long one. The entire process often takes several years. And the transition can take even longer. Time and preparation is necessary to ensure an owner gets the maximum value for his or her business, and patience will only help the process.

About Generational Equity

Generational Equity, a Generational Equity company, assists closely held and family-owned businesses in completing mergers, acquisitions, divestitures and strategic growth initiatives. Generational Equity has more than 300 professional advisors and affiliates nationwide and is headquartered in Dallas, with affiliate offices in New York and Chicago.