Good Time For Business Exit

“For Aging Population, 2011 Is A Good Time For A Business Exit Strategy”

As baby boomers inch towards retirement age, those that own small businesses should be considering their exit strategy if they haven’t already.

With a majority government in place, commercial financing loosening up, and interest rates staying at relatively low levels, the current environment for sellers is gaining strength.

On the flip side, you never know when a window of opportunity can close, so putting things off for a couple of years could lead right into a tougher market.

And let’s face it, the last 4 years have not been a whole lot of fund for sellers.  Sales have been down, profits are down, and buyers have been struggling to secure the capital necessary to complete a purchase.

But if you own a business and want to take a serious run at selling in the short term, then here are some things you may want to consider.

First, make sure that your business is in a sell-able position or attractive selling position.  This is accomplished through three years of accountant prepared financial statements at a review engagement or audited level.  Notice to reader statements are not going to cut it for anyone that is going to require financing.  Outside of being able to support the numbers and performance, the next big item on being attractive is the ability for the existing owner to exit without causing business disruption.  If everything is still flowing through the business owner’s hands and dependent on their direct relationships on customers and suppliers, then the chances of transitional business failure are going to be higher, which will impact price and sale-ability.

Second, be prepared to work with the buyer to come up with a purchase and sale transaction that is going to be win win for all sides, including a third party lender.  It’s unrealistic in most situations to just ask for a selling price, collect it, and exit stage right with no further involvement or risk in the transaction.  If the transaction needs to financed by a third party lender or investor, they are going to expect that the seller is going to help reduce the risk of loss through transition assistance, meaningful recourse agreements if financial disclosure proves to be inaccurate or misleading, and business financing assistance to at least cover off the value of goodwill built into the purchase price.

Business owners that get properly prepared for selling and actively participate in the process to secure a buyer are more likely to sell faster and for good value than those that do not.

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