Strategic Options Analysis

SellMyCompany – Strategic Options Analysis

SellMyCompany – Strategic Options Analysis

All business owners think about selling their business at one time or another.

Best terms? Many business sellers don’t think about the fact that the terms of the sale can have a lot to do with the valuation and the net amount of dollars in your pocket after taxes. We tell people who are thinking about the sale of their profitable business that we will give them a million dollars if they will take a dollar down and a dollar a day for the next million days. We might double that if we do not have to give a personal guaranty. If the company has sound middle management and makes $50,000 after taxes every year, after our $365 per annum debt service, there remains a nifty profit and little burden of management. Retrospectively, if a person seeking to sell their company wants all cash, we as brokers need to ascertain if the business has sufficient cash flow to support the debt service and leave a cushion for working capital. Most lenders like to see a cash flow coverage of at least 1.2 to 1.3. If the ratios don’t work, we either have to find a buyer with a fat wallet or advise the seller that they will have to be the bank. If you are contemplating the sale of your business and your bookkeeping leaves something to desire, now is the time to clean up your books. No one likes paying taxes but the company that does usually gets a better selling price and more cash at closing.

If you want to sell your business, it is important to think about what you have to sell. If you have a regular C corporation, you’ll probably want to sell the stock of the company. If you sell the assets of a C corporation, the corp. gets taxed at the sale and then the shareholder is taxed when the company distributes the proceeds. Let’s look at various ways to sell your business. If you sell the stock, you can delineate exactly what the balance sheet will look like at the closing date. If you sell assets, you will typically select such assets as furniture, fixtures, equipment, vehicles, trade name, vendor and customer list, proprietary things like special processes in the manufacturing plant or recipes that customers love if you have a restaurant. Service companies don’t usually have as many assets as manufacturers or distributors but can have extraordinary cash flow. Intangible assets like , phone numbers, leasehold interests, etc. all have value and must not be neglected. A knowledgeable broker or merger & acquisition expert will guide you through these steps both in the appraisal and sale of your business.

A prudent step in deciding if now is the right time to sell your business is to have a Strategic Options Analysis (SOA) performed by . An SOA, a proprietary tool of the team, combines the elements of a business appraisal, a financing template to determine the amount of cash a lender will give, trends of the business, economy and the industry you are in. The SOA starts with a recast of your financial statements, adding back non-recurring and perquisite expenses. This is a critical exercise in selling a business because buyers and lenders expect that the tax returns be prepared to minimize taxes. SOA’s also examine the company’s history, management makeup, working capital needs, business selling market, past sales of similar companies, client concentrations, vendor relationships, and countless other critical factors that will comprise your business’s value.

Having an SOA prepared allows you and other decision makers to make an informed judgment. Maybe the market is red hot for selling your business or maybe the SOA will highlight things that if done will enhance the company’s value down the road. When we say, “Trust the Experts” we are proud that and its affiliates have appraised and sold thousands of businesses for nearly thirty years. Our team is as long tenured as any you’ll find in New England or around the US. We find it’s valuable to have knowledge of what it feels like to be sitting on both sides of the closing table. Selling your business can cause emotions to run high. It’s not just about the money.

So if you’re thinking about selling your business, whether it be large or small, will determine your value, financing strategies, confidential marketing plan, pre-screening of potential buyers, handle offers and letters of intent, negotiate the deal to the closing table and ultimately put the largest check in your hand that the market place will yield. Thank you for your consideration.