5 Important Truths About Selling Your Business

1. Timing May Not Matter.

Don’t worry about the economy or “market” timing. Focus on running your company as if it’s for sale any day. That mindset will increase your sale value and make you more attractive to buyers during uncertain times. Your revenue, bottom line or EBITDA are important to your sales price, but your company’s risk management, back-office systems, team culture and customer brand and loyalty will have an exponential impact on your sales proceeds. Time your exit on your calendar and consider the investment risk in continuing to own the business.

2. Your Bottom Line May Not Matter.

Some businesses are valued based on their revenue, some on profits or EBITDA. But most are valued based on their ability to add value to the buyer. If your business will be the buyer’s foray into your industry, prepare your growth potential story. If yours is an add-on business for a buyer, focus on your company’s ability to easily integrate into the buyer and to achieve value accretion to their current business. Either of these is more about your company’s intangible value than revenue or profits. Think talent and culture, IP, value-add services and differentiators, IT systems, compliance, risk management and administration, and external customer brand, loyalty and traction.

3. Your Management Succession and Life Plan Matter.

If you focus on a successful exit from the standpoint of your personal owner financial and life plan, you will maximize the value of a sale for all stakeholders, including all owners, investors, employees, suppliers and customers. Most sales that disappoint sellers are not about the price, but are about a lack of planning for management succession and the owner’s life after the sale. That life might involve a clean break or continued employment and ownership, but buyer’s care about the owner’s life plan, because it will impact the sale process.

4. Your Net Sales Proceeds (After-Fees, Debt Payoffs and Taxes) Matter.

The valuation or sale price is one thing. Your net proceeds from the sale after debt payoffs, income taxes and professional fees and expenses is what counts for you. This is where your advisors come in. They need to structure the deal in a way that minimizes your taxes and post-closing risks related to purchase price adjustments, deferred payments and seller indemnification liability.

5. Avoiding an Ambush at the Finish Line Matters Too.

You pay your attorney, CPA, financial planners and investment bankers to avoid an ambush at the finish line. The deal can change from the letter of intent to the purchase agreement. The purchase agreement will almost always include working capital and other purchase price adjustments post-closing. The deal may include some post-closing payments such as a seller note or “earnouts”, and some seller risk of post-closing buyer claims for pre-closing liabilities or risks. Again, the valuation or gross purchase price is only the beginning. The net proceeds that you will receive after debt, expenses and taxes, and after any post-closing buyer adjustments relating to deferred purchase price payments and discovered liabilities, are what count. Pay for good professional support in maximizing the closing proceeds, managing any post-closing payments, and minimizing the risk of post-closing price adjustments or seller give-backs or liability claims. Your net proceeds after all of these is what you can invest for the rest of your life.

____

Steven J. Keeler

Keeler PLC

1210 E. Cary St., Suite 203

Richmond, VA 23219

(434)409-9224