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March 23, 2023
Most business owners dream of building a successful company to generate revenue and establish their legacy.
However, many entrepreneurs don’t plan for the day they will ultimately exit their business.
Whether due to retirement, health issues or simply wanting to pursue a new venture, the day will come when every business owner will need to consider selling their business.
For many business owners, selling their company can be overwhelming – as there is much to consider, including financials, taxes, deal structures, etc.
The good news is, with proper planning, you can maximize the value of your business and ensure the sale goes smoothly.
Here are three steps you can take to help increase the value of your business.
Regularly assess your business
One of the most important steps you can take to increase the value of your business is to assess it regularly.
This means reviewing your financials and identifying areas for improvement.
You should have a system to do this routinely, consistently reviewing the numbers honestly and with an eye toward improvement.
In addition, it’s recommended to have a professional conduct a business valuation every three to five years.
This will provide you with a figure of your business’s worth, as well as highlight areas where you can make changes that could positively impact its value.
A business valuation can also help you identify strengths and value drivers of your company, as well as areas where you can improve.
Think about potential deal structures
It’s essential to think about the different deal structures available and how they can streamline the transfer of ownership.
When it comes to selling your business, the terms of the deal structure can significantly impact your payout.
One example of a beneficial deal structure is an earn-out provision, which can increase net proceeds based on a company’s performance after the sale.
Other factors to consider when considering deal structures include the timing of payments, seller financing and any contingencies.
It’s essential to work with an experienced advisor who can help you navigate the various deal structures and determine which one is best for your specific situation.
Work with professionals
To ensure you get the most out of your sale, it’s recommended you work with professionals – including a certified financial planner, accounting professionals and legal counsel.
They can help you plan for tax considerations, including capital gains taxes, 1031 exchanges for real estate, Sec 453 plans and transfers to family members.
They can also help you understand the different deal structures and help you decide which is best for your situation.
Investing in their services can significantly benefit your business and pay off in the long run. They can help you make informed decisions that will increase the value of your business and ensure a smooth transition when it’s time to sell.
Experts can help ensure your business is set up for success, both in the short-term and long-term.
In conclusion, business owners must plan for the day when they will eventually sell their business.
By taking the time to regularly assess your business, think about potential deal structures and work with professionals, you can maximize the value of your business and ensure a smooth sale.
It’s never too early to start planning, and by taking these steps seriously, you can set yourself up for future success.
Glen Herman is a Business Intermediary of Creative Business Services/CBS-Global.
