I was teaching a workshop for our business coaching clients when one of them asked, “When I’m ready to sell, what can I do to get top dollar for my company?”
While that’s a solid question, an even smarter version asks, “What can I do today to prepare to sell my business two to three years from now?”
The time to prepare to sell your company is now, not years down the road when you finally feel ready to exit.
Here are three concrete steps to follow as you prepare now to sell later.
Step 1: Determine what your business is currently worth.
How do you find out what your business is currently worth? You can look to industry or association sources for the most common valuation methods for your type of business. You can hire a valuation firm, work with an investment banker, or even hire a CPA experienced in your industry and type of business. At the very least, get online and start to research tools to help you value your company.
Even more important is understanding how companies in your industry and business category are valued by the market.
What formula is most commonly used? What is the current range of business multipliers and how can you command the top end of that range? Find out!
This lets you start today to hone how you build your business to make it more valuable to a future. Generally, the things that make your business more valuable to a buyer are things that make your business a better company to own (remember, buyers are smart–generally!)
Step 2: Do a “buyer’s audit.”
Put yourself in the shoes of a potential buyer and take a hard, long look at your business.
Step 3: Mitigate risks and enhance value.
There are 6 major causes of risk for a potential buyer (see below). Your job is to do everything you can that mitigates these risks and enhances your company’s value.
6 Key Risks from a Buyer’s Perspective:
The bottom-line question is this: “Are you taking action to mitigate as many perceived buyer risks as possible over the next two to three years before you sell?”
Mitigating risks is half the equation; the other half is enhancing value. What can you do over the next few years to enhance your business’s value?
Now it’s time for you to take 60 seconds to list out the top 3 action steps you are going to take in the next 90 days based on what you learned in this article. Do it now!
Also, to help you grow your business and get your life back, we just put the finishing touches on a powerful free toolkit which includes 21 in-depth video trainings on how to intelligently scale your company. To access this free toolkit click here. Enjoy.
Originally published at www.inc.com