- THE MAGAZINE
I am preparing to sell my business, even though I do not plan to offer it for sale for about five years. So I am looking for additional ideas and input on how to do this. I know you sold your business successfully and want to learn from people who have actually done it. I want to be as prepared as possible to help my buyer justify making a sizeable investment.
-Planning in Portland, OR
Congratulations on thinking five years out. Some of my clients think next week is long-range planning! And I don’t know your personal situation, but remember that selling your company should be just one part of your well-balanced personal investment program.
Plus, be super sure you truly do want to sell your business. You’ve heard of buyer’s remorse. Well, I can assure you there is also something called “seller’s remorse,” so be absolutely sure you really do want to sell your baby.
Anyway, here are a few thoughts:
1. Focus on cheerleaders: Remember that all you are selling in the final analysis are your cheerleader customers and your systems to keep them, make more and do it without your sparkling personality at the helm every day. So invest time in systems that will let you, your employees and your buyer easily develop cheerleaders.
2. Don't want to have employees? That’s OK. But don't expect your company to sell for a huge amount of money. Prepare for your retirement in other ways. See my point about a personal investment program above.
3. Get your numbers looking great: Your business selling price, as well as its desirability, will be based on owner's adjusted cash flow. This is the amount of money left over after all your business expenses have been paid, including hiring a manager to do the work you do now in the business. So remember when you hide profits from the IRS, you wind up shooting yourself in the foot when it comes time to appraise and/or sell your company!
4. Invest in a Certified Business Valuation: Speaking of appraisal, please do not just come up with a price. Especially if you have a sizable operation, it will be well worth it to have a Certified Business Valuation performed. My professional appraisal cost me over $10,000, but the appraisal came in at over double what everyone told me the company would sell for. And yes - it did in fact sell for the appraised price. Money well spent!
5. Be very careful if you finance the business sale: I received 97% cash up front and am very glad I did. If I had not, I guarantee you I would have had a shell of a business back in my lap within a year of selling it. Not fun and yet I hear this sad story way too often!
6. Consider your tax planning ahead of time: Will you get lots of cash up front from your business sale? Great! But hire expert legal and financial advice on how to structure the sale. My CPA saved me over $150K in taxes just by slightly changing the wording of the sales document. Hire the best financial advice out there.
NOTE: For a free copy of my step-by-step special report: “Cashing Out: Preparing Your Cleaning Business for its Eventual Sale,” write me at stevet@JonDon.com and put the phrase “Cashing Out” in the subject line.
And hey, Planning, let me know how your business sale preparation processis going!
Once again, good for you, Planning, on setting a five-year timeline to prepare your business for sale. That is just about a minimum. All too often cleaners wait till they are desperate and/or burned out and then try to find a sucker. Guess what? Won't happen! One dirty little secret of our industry is most carpet cleaning companies never sell… they just wither away! So sad because it doesn’t have to be this way!
The bright silver lining in this dark cloud? Everything you do to prepare your company to sell also makes it a better/more profitable/smoother running operation that may actually become fun to own.
In fact, several of our SFS members came to our Strategies for Success seminar with the specific goal of selling their company. But after putting our SFS systems in place they decided to keep their business just because they were having so much fun. So you win either way!
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