Value Drivers

Management Team

Is there a stable management team in place that will most likely stay after your transaction? How active is the owner in the management of the company? How difficult will it be to replace management?

Operating Processes

Is there a defined, consistent process in place to deliver the goods or services? Are the operating processes documented?

Customer Base

Is the customer base composed of multiple accounts, or is a significant portion of your business generated from a small number of key accounts? How long have your customers been doing business with you? Does your customer base typically generate a one-time sale, or is there repeat or recurring revenue associated with the accounts?

Appearance of Facility

Is your workplace neat and organized or dirty and full of clutter? A disorganized workplace can give a negative impression to potential buyers. Do you have good financial records? Do you have internal controls in place to prevent inventory shrinkage or theft? Are you accurately reporting all income? It is difficult to capture value from "unreported" income.

Cash Flow

Is the cash flow for your business declining or increasing? Declining cash flows always raise concerns for buyers and lenders. Consider implementing changes to stabilize cash flows prior to the sale.

Growth Strategy

Is there a realistic plan in place that could generate growth for the company? Buyers are usually interested in improving the business. Be prepared to help potential buyers understand how the business could grow in the future.

Tax Considerations

Obtaining the maximum value from the sale of your business is only half of the challenge. The after-tax proceeds that actually make it to your pocket is "the most important part," in our opinion. Please consult with Exit Equity, as we are knowledgeable relative to the transfer of businesses and can give you valuable insight. There are a number of tax savings strategies that can substantially affect the amount of after-tax proceeds generated from the sale. In most cases, these strategies must be in place prior to acceptance of a structure, term sheet, Letter of Intent, or Offer to Purchase for your business. We will facilitate with our accountant some common tax strategies for you to consider and will advise you on what might be best for you. Some ideas include:

  • Business Structure: If your company is a C-Corporation, you should consider changing the structure to an S-Corporation before the sale. Issues associated with "double taxation" can cause you to pay considerably more tax on the sale of assets owned by a C-Corporation.
  • Charitable Remainder Trusts: Donating all or a portion of your business to a charitable organization of your choice is another way of reducing the tax consequences associated with the sale of your business while helping out an organization that you want to support. This option can provide a good deal of flexibility in terms of residual income to you and potentially your heirs.

When Do I Start?

Whether you are 3 months, 6 months, a year, or 3 years away from your expected time to exit the business, there are things you should be thinking about with regard to your exit strategy and transition planning. Remember that things can change unexpectedly. It is always better to understand your various options and net to you as you implement the decision of selling your most valuable asset ... your business. The earlier the better, proper planning makes for quality exiting.

Exit Equity understands the importance of planning, value range, and net-to-you, with regard to the sale of your business. We would appreciate an opportunity to meet with you to get a good understanding of your requirements and to discuss various options to prepare for a transfer of ownership when you are ready.