When should you prepare your company for sale? The best time to start is now – here’s why.

When do you determine to put on your company the sign “For sale”, how much time will it take to transfer every part to the latest owner and start counting your profit? Do not be discouraged when I say that it’ll take years – or should.

This does not mean that the market has dropped or your company is not desirable. Obtaining the price you deserve takes years of essential actions to raise the value of your company and offer potential buyers something so attractive. This is not one transaction, but a long -term plan that is an integral phase of your business strategy.

The ideal start line for selling your company is really the day you start it. The next best time is today.

To sell your company for maximum value, start with the planned date of sale and work back. You could also be surprised by seeing how little time sales take and how much it spends on shaping the company. Reverse engineer, step by step.

Phases of the sales process

From the date of sale of the company you will need about a yr to go through the exit process. You may have to cooperate with a business broker and an investment banker to lead you through sale.

Your business valuation will depend on your last three to five years of economic history. You cannot just base your value into one good yr. Even if you sell it on an internal side, reminiscent of an worker or member of the family, they’ll look on average three to five years.

While these three to five years are not produced, you will want to spend three or more years to improve your profitability.

Along the way, you can still optimize. For example, if we would like to bring the company to a net profit of USD 500,000 a yr and we would like to sell it 4 times, we will make corrections so that, say, the third yr, it reaches USD 500,000 from net profit. When we have funds showing USD 500,000 or more at the bottom line for three years, then we went to the market for sale.

This leads our time to 4 years. You will probably have to participate in the next yr, before these three years of proven funds, to improve the foundation, stabilize activities, optimize profitability and introduce processes. This expands our time to five years, and if the buyer wants a five -year history, he’ll take it to seven years.

Lay the Foundation

Before you start building these three to five years of finance, evaluate the company to see what works, what is not and what are your goals:

• Improving profits: Most company owners exaggerate, even if they think they are conducting a slim surgery. They focus on revenues, not a margin of profit. I used to work with an accounting company that runs accounting on site and for years their prices have not modified. The owner was not aware of the influence she had on her because she didn’t watch. These profit margins will likely be very essential in the sales process. If someone looks at your numbers and see that you don’t really charge real business costs, they’ll reduce the company’s value.
• Owner’s involvement: How do you participate in business and what key roles do you play? If you are very involved, you must go back so that the company’s success is not dependent on you. One of the firms we cooperate with is very dependent on two partners who are the owners of the company. They have about a 10-yr schedule, because they introduce a latest division, which has higher profit margins, but they can even be less dependent on them so that they’ll get out of a much higher valuation.
• Growth: After optimizing the margins and activities, they work effectively, focus on development. Increase revenues while maintaining higher profit margins.
• Executive strategy: Decide if you will sell to third parties, you will transfer ownership to your family or employees, or perform an alternative choice. Build the appropriate team, including a banker, lawyer and accountant to support this phase.

All this stuff are equally essential and form on themselves – take them individually and in the right order to get the biggest profit. If you try to develop your business before optimizing margins, for example, I’ll develop your business on a lower margin.

Continuous strategy

The axis of the output time is not static; It should be reviewed and adapted annually. When strategic planning at the end of the yr, rate the following:

• Your Succession Plan: What will occur to business if something happens to you?
• Your basic option: Do you still plan to sell to a third person or do you have your goals?
• Your backup output option: Do you have an emergency plan, for example, selling employees or a company solution?

If you want to get out of your company, what you put in it, you must treat it like the next phase of your company, which lasts in the long run. Having a clear schedule ensures that you are at all times prepared, no matter whether you direct a specific date of sale or you must adapt due to unexpected circumstances.