Ginsberg: Maximizing the Value of Your Business Starts Now

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Mike Ginsberg

Mike Ginsberg

As we return to our work-life routines, leaving behind the exhausting mad dash of year-end numbers crunching, last minute tax planning, and the whirlwind of holiday parties, client lunches, staff meetings and last-minute holiday shopping, we all eventually turned the lights off to 2012.  Welcome to the first full week of the New Year.

The start of a new year is a great time to reflect upon our accomplishments and set goals.  Perhaps you’re resolute to lose weight, quit smoking or spending more time with the family this year.  If you’re a business owner, you may find yourself asking your significant other or your trusted advisors the following question:  “When is the best time to sell my business?”

The utopian time to sell any business is when the economy is strong, the stock market is booming, and when lenders and investors are well-heeled and actively pursuing deals.  On an operational level, the perfect time to sell is when your business is consistently achieving sustainable and profitable growth, when your business has no holes in its team and when your business is operating without any legal issue.  On a personal level, the best time is when you don’t have to sell because your health is fine and your family, marriage and/or business partnerships are perfectly aligned.

In simple terms, the very best time to sell your business is when the proverbial stars line up exactly right.  How often does this happen?  The answer is next to never.  How much do we, as owners, actually control?  The truth is very little so don’t dwell on it.

Instead, I suggest you focus your energy, and the energy of your management team, on those things that will position your business to achieve its maximum value potential when it comes time to sell.  Here is my list of the top 5 value drivers that every business owner can directly impact.

Getting and keeping your financial house in order

Without question, the most scrutinized aspect of any company when it comes time to sell is financial performance. Having the proper controls in place will help you position your business to achieve its maximum value potential.  Here are 5 important questions to ask yourself and your team:

  1. Is your team able to accurately track profitability contribution margin on an individual client basis?

  2. Do you have a full-time and qualified person in place responsible for the day-to-day financial management of the business?  An added plus, does this person have experience in the sale of a business like yours?

  3. Does your business have a defined budget in place that it follows?

  4. What about a defensible forecast with current assumptions?

  5. Do you maintain professionally reviewed or audited financial statements?

Controlling the diversification of your client base

Buyers notoriously raise concern when a seller generates the majority of its revenues and/or profits from one or a few clients. For most buyers, a diversified client base is preferred because it eliminates risk of significant loss when a business is sold. It is quite common for many businesses to develop significant client concentration as they grow. My strong recommendation is to control it from the outset but putting appropriate measures in place to prevent it from happening.

Address all legal and accounting matters

Does your business have any accounting “irregularities”? If so, they could be early indicators of client loss and need to be addressed before a sale.  Certain types of lawsuits may be viewed in some industries as “the cost of doing business”. These should also be fully disclosed and, depending on their nature, may or may not affect value.  Know your industry’s standards and don’t make the wrong assumptions about how a buyer may view legal matters.  Any larger potential lawsuit should be addressed and resolved prior to a sale.

Are you proud of your business’s presentation?

What impression do you think visitors have when they arrive at, or walk through, your place of business? Is this the impression you want them to have?  Are operations staffed at appropriate hours?  Are unsightly wires away and recycling bins visible?  All businesses should convey a clean, efficient and safe environment with employees and management who apparently like what they do and are good at it.   This applies to all of your branch offices and centers of operations.

Addressing and resolving any issues up front prevents surprises from arising that may negatively influence value when it comes time to sell your business.

 

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Posted in ARM in Focus, Debt Buying, Debt Collection, Opinion, The Economy .

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