Is Your Business Ready to Sell?

Let’s assume you’re up for a full-steam-ahead approach to selling. The first step is to cast a penetrating eye over the entire business. More than likely, certain things will need sprucing up before going to market. We’re not talking about a major overhaul, but rather a full inspection with the willingness to make a few critical improvements where needed.

Here are the essential points to address while in the planning and early phases of selling your company.

1. Top-line focus. Keep those orders coming! In general, you need to run the business as though you’ll be there for the next 20 years. Make sure your current customers are happy and accelerate new business development initiatives. Whoever acquires your business will likely have their own ideas about driving growth, but if your formula has been successful, by all means apply and repeat.
2. Manage costs but don’t overcut. A multiple of EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, is a key calculation buyers will use to determine the value of your business. For most companies with EBITDA in the range of $1 million-$5 million, the multiple range is 4-8, or even higher at the top end. So, you want to show as strong of an EBITDA number as possible – and the Osage team has the expertise to help you with this. At the same time, preparing for a sale is not a good time to slash and burn costs from your operation that might adversely affect the quality of products/services or jeopardize sales and gross margins. However, if there are real efficiencies to be gained by reducing expenses, and you’ve been delaying making those changes, then go at it.
3. Strengthen your team and technology. Do a gap analysis on your people and systems to determine where the weaknesses are and whether they are performing optimally. Will these important facets of your company stand up to buyer scrutiny? Remember, it will enhance your company’s value to be able to transition a full, productive team of employees and an IT infrastructure that is up-to-date. Also, to the extent that the success of the business relies less on you, the better, since post-transaction you’ll likely be exiting or taking on a different role.
4. Document processes and develop a rudimentary growth plan. The acquirer of your business will want a completely seamless transfer of ownership. While in most cases, you’ll stay for a period of time to facilitate the transition, there is significant value in having your business practices and processes documented. In addition, sketching out a viable growth plan you can present to interested buyers will demonstrate that you believe in the company’s future prosperity. A new owner may or may not run with your plan, but having one to pass along will be regarded positively.
5. Facility and equipment. Generally, the buyers you’re interested in will ask for a tour of your facility before issuing a Letter of Intent. While Osage is at work preparing the materials and research we will use to market your business, some of your time will be well spent cleaning up your facility, and even replacing or repairing old equipment. Office spaces should be tidy and well organized so they convey a professional and welcoming impression.

There are additional financial aspects of your business that will need to be properly organized and prepared. Our expertise will be indispensable to an accurate presentation of your company’s historical and projected financials.