Many Baby Boomers left the grind of the corporate world to start their own businesses and live their version of the American dream. Now that those dreams have come to fruition, trillions of dollars worth of businesses are expected to transition within the next 10 years.

However, without an accurate plan for their exit, these business owners won’t receive the nest egg they need for transition into retirement. If you are a business owner thinking about selling, read our three tips to successfully prepare for your business transition.

Assemble your team

Few business owners, no matter how confident, can do all the aspects needed to successfully plan for a profitable exit. This lack of ability isn’t a jab at you; rather, it is a testament to the strong skill set that made your company successful. Your business thrived because you focused on what you do best, whether that is baking pies, manufacturing pipes for plumbing, or repairing residential roofs.

Throughout the life of your business, you gathered a team of experts around you. They counseled you on marketing tactics, kept your finances in order, and created operational processes and procedures. In the same vein, exiting your business is best done with a team. Gathering the right advisory team helps maximize the value of the business and achieve a top-dollar sale. This team is multidisciplinary, with specialists in law, accounting, tax, mergers and acquisitions, and wealth management.

These experts guide you through the selling process, place an accurate value on your business, secure and vet qualified buyers, and tie up all loose ends prior to closing. This lets you focus on your business with confidence, knowing that your trusted partners are working to secure a sale.

Iron out the details in advance

Advance preparation has several advantages. It minimizes risk around the transaction, generates a higher sales price, and optimizes the value of the business. Furthermore, it ensures that your sales strategy is aligned with your personal financial objectives. There are three areas you can focus on to help get your details in order.

Management

Firstly, establish a strong management team that will allow for a smooth transition with the buyer. A loyal, competent group keeps operations running optimally during the transition period. In addition, they provide assurance that the business will continue to thrive without you there.

The Back End

Secondly, take time to establish processes and procedures, ensure you have up-to-date financial statements, and generate reliable reports. In short, zip up things on the back end. The benefits are two-pronged: you have a better grasp on the overall health of your business, and potential buyers have more visibility into your business structure. As a result, both sides breathe easier during the selling process.

Growth Strategy

Lastly, develop a comprehensive plan for sales growth. Take time to develop a plan that maximizes profitability while keeping costs low. This shows potential buyers a clear path to sustainable growth once they buy your business.

Create a holistic plan

When it comes to planning for the transfer of ownership, there’s a tendency for business owners to neglect their exit strategy. Exit planning professionals agree that most of their clients don’t work on developing their plans until it’s too late. When business is poor, owners focus on keeping the doors open. On the other hand, when business is good, they work to capitalize on growth opportunities. It can be compared to estate planning- it’s something you know you should do to provide for your family, but it tends to get put on the back burner.

Creating a thoughtful, pre-transaction plan around the wealth that the deal will generate gives you better long-term results. It provides financial security for both your individual bottom line and your family’s legacy. The most successful outcome includes a well thought-out tax plan, a multigenerational wealth strategy and a comprehensive investment plan. Beyond that, it includes buyout terms, owner financing options, and payment details from the sale.

Utilize your team of experts to flesh out each aspect of the plan. Their knowledge will provide the best possible terms; plus, it will remove any question about your financial future.

Conclusion

In the end, deciding to sell your business is a big decision. As a business owner, the amount of work you put in on the front end will pay out on the back end. This applies to your company’s profitability as well as the payout you receive from its sale. The common saying, “if you fail to plan, you plan to fail” rings true, as only 20% of eligible businesses actually sell each year.

Start the process of transitioning into your next life phase by meeting with a confidential business intermediary. They will walk you through the selling process, assess the current state of your business, and work on your behalf to ensure a smooth transition. Contact a confidential business intermediary at the CBI TEAM today, or call our office at (479) 770-8989.

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Until the sale of your business is finalized, your focus as a business owner should be sustainable sales growth. Not only is it a good feeling to have a thriving bank account, but a business with steady sales growth is extremely appealing to potential buyers. It’s much easier to convince a buyer that your company is worth investing in if your business review shows healthy financials than if it’s showing stagnant or declining revenue trends. Whether you’re in the early stages of business ownership or heading toward the final stretch, utilize the following tips to keep your business healthy and appealing to future buyers. 

DIFFERENTIATE YOUR BUSINESS

You can’t be everything to everyone, so stop trying! In a world of mass consumption, it can seem like the best course of action is to spin your business to fit into as many different-shaped holes as possible. Recent data across various industries is showing otherwise, highlighting the importance of brand differentiation.

One great example is Trader Joe’s, a quirky grocery store that carved out a niche market with private-label products, low price points instead of coupons, and a small, rotating number of offerings (think 3,000 SKUs vs 35,000 that fill the shelves of standard supermarkets). Trader Joe’s decided early on who it wanted its target market to be, and then dove into pulling those people in. Do they appeal to the masses? No. However, they generate industry-leading sales per square foot, beating out Costco, Whole Foods, Walmart and the like. They are proof that bigger doesn’t always mean better.

BUILD A NETWORK

When you think about your network, segment it into three areas: support, mentors, and referral partners. Each area plays a key role in the overall growth of your business.

Your support group consists of people who will both motivate you and talk you down from the ledge. They are your confidants- the ones you share company visions, milestones, and failures with. This segment has your back regardless, and that’s extremely important to keep you on track when things get hard.

Your mentors are people you want to learn from- people who have gotten to where you want to be and are willing to help you get there too. Find leaders in your field and then take inspiration from their keynote speeches, listen to their podcasts, read their books, and sign up for their business development courses. 

Your referral partners are trusted individuals who know you, trust you, and speak on your behalf to potential clients. These partners can be people in the same industry or people in your business community. 

STAY CONSISTENT

Consistency is key in all aspects of your business. Customer service, product quality, and marketing efforts are ineffective if they aren’t done well on a regular basis. You’ve invested your livelihood in your business, so take time to ensure your operations, finances, and marketing are zipped up. Staying consistent across the board (and holding your employees accountable to the standard you’ve set) makes for happy customers, and happy customers are loyal, repeat customers.

FOCUS ON 1%

When you think about growing sales, customers, traffic, etc., it can get overwhelming thinking about how to stay on track. Instead of staring at the large growth percentage you want and panicking, break down that number into manageable, bite-sized pieces.

Let’s say you want to see a 12% increase in sales this year. Divvy up that 12% by month- all you need to focus on is being 1% better than you were the month prior. 1% seems insignificant when you look at it by itself, but by that number compounding upon itself throughout the year, you will see significant growth!

BUILD A SOLID PLAN

The four prior points are great tips, but they don’t fully come to fruition until you create an action plan. Many a business have failed, not because the idea wasn’t good, but because there wasn’t a plan that pointed the owner in the right direction and laid out the steps to success.

Take points #3 and #4 as an example. If your goal is to grow your business by 1% each month and consistently gain new customers, what steps are you taking to make that a reality? A goal without a plan is just a dream! Create solid action items, implementation strategies, and then FOLLOW THROUGH to achieve your goals.

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