5 questions before selling your restoration business
If you are paying attention to the restoration industry news - you have seen the many high profile acquisitions occurring across the US. If you are thinking about selling, then you need to give consideration to the following questions. After you have thought about and answered then you may take the next step. 1. Who am I without my company and my job? Most entrepreneurs do not have an identity without their business because that is what they have done for much of their working life; pouring their blood, sweat and tears into their business. For many, the thought of selling and being able to step out of their business is a liberating thought, yet the reality of this decision is life changing as well. In assessing this process, you need to think about the impact on your life and lifestyle. I am working with a business owner that has been working in and on his business for over 50 years. His business is valuable, but he also does not know what life looks like without his company. If you have done a great job building your business, then it should be easy to own and manage. Before you decide to sell your company, you need to think about your life without the business, the families of the people working for you, your business purpose, and the satisfaction that is derived from owning and running your company. Once you know how you will spend your time and what the next chapter of your life looks like - and this makes your happy, then you are ready to think about what makes your business valuable to a potential buyer. 2. The next question you need to answer is if your business will function without your direct involvement? No one wants to buy a low-paying job. People will be willing to pay a premium for a profitable business that operates without the direct involvement of the owner. Look at your time and make sure that you are working on your business and not in your business. This means that you are not essential to getting estimates out the door and projects complete. You need to assemble a great team and then empower them to run the activities of the daily business. Your job should become one of a great coach, conductor, and leader. When the company operates without your daily involvement, this is strong benefit to the future owners. A good test for your company is whether you can go away for a 2-week vacation without operations missing a beat. 3. The seller of a house knows that the cub appeal is one of the key drivers of value and interest in a property. You need to take the same approach when you consider selling your business. Curb appeal is quite literally the physical appearance of your office workspace, assets, staff, website, paperwork, and outward representations of your business. Take an outsiders view of your company and think about how it looks. A sloppy or unprofessional appearance often hints of operational issues. Give prospective buyers a great first, and often lasting impression of your business. This is also how your client will look at your company – so it is especially important. 4. When determining the value of your business, the financial statements will reveal the truth about your company. Make sure your financial house is in order, properly structured and very clear. All statements need to align and paint a clear picture of operational excellence. Be able to verify your numbers, tie your statements together (balance sheet and income statements) and show stability in revenue, profits, and cash. It is not enough to have your CPA or CAA run a monthly statement. You need to prepare monthly statements and be able to explain and defend the information that is presented. These numbers will be used by the buyers to determine value, and then critically and deeply analyze this information during the due diligence process. Having clean and quality numbers is essential to getting a strong price, and then assuring you have a successful transaction. 5. The next question to answer prior to selling your business is, do you have a balanced client base? I have worked with companies that were dependent on two clients for over 80% of their work. This is a dangerous situation and one that will substantially impact potential buyers. Buyers want certainty, and are looking for a return on their investment. The element of risk will limit the buyers and will minimize the value of your company. A strong business will not be dependent on a single client for over 20% of overall revenue. If you lose any client, it may hurt, but will not be detrimental to your organization. You need to be able to report your top clients, all revenue sources and be able to show the source of your leads and sales. Buyers want to be able to predict future sales and profitability – having balance in work sources make these predictions more accurate and easier to forecast. If you are interested in selling your business, then make sure you have good answers to the above questions or issues. Having strong answers to these questions will improve your ability to sell your business and get the highest price possible. If you are looking for assistance in preparing your company, or planning the next steps, contact Business Mentors today. We have a great track record of helping owners prepare their business and then navigating the entire process. Phillip@businessmentors.net