Quick Links: Return To Entrepreneur’s Resource Center

Entrepreneur’s Adviser — Business for Sale

“Entrepreneur’s Adviser — Business for Sale” Question: “What steps should we take to sell our company, and how do you put a price on the business?”Answer: Look at your company through the eyes of a knowledgeable buyer. Every company has a few warts. Identify yours and clean them up. Obsolete inventory? Get rid of it. Noncollectible receivables still on the books? Write them off. Get your corporate records in order, especially your minute book, share-certificate register, open litigation files and fixed-asset ledger. These items will be closely examined.

There is a big difference between price and value. The price you hope to obtain often has little or no relation to the value. There are many methods for valuing a business. The IRS spells out eight ways in Revenue Ruling 59-60. Remember: Real value is seldom represented on financial reports. Value will often be intangible assets, such as location, distribution system, patents and people.

Estimate future cash flows that can be related to your intangible assets.Caution: The buyer’s estimate of your business value is what really counts. Give qualified and interested buyers all the data they need to tell you what the business is worth. Resist attempts by buyers to have you set a price. Even if you have a “walk-away” price in mind, make the buyer provide an offer.

Best advice: Don’t prevent a sale or lower the value of the business by slacking off and failing to run the business properly during the exit phase. (“I won’t have to worry about this much longer.”) The sales process can last as long as nine to 15 months.

Adviser: Gregory B. Hadley is a consultant to small- and mid-market companies, advising them on growth strategies, enhancing value and succession/exit planning.

Submit your question via e-mail to editor@lowe.org.

Related Articles...
Don’t Buy What You Already Own

If you’re considering an acquisition to help grow your company, look for deals that offer complementary expertise, advises John M. Cook, CEO of The Profit Recovery Group, an Atlanta-based company that provides recovery audit services. When Cook purchased The Profit Recovery Group in 1991, it was making about $5 million in annual sales. That figure grew to $202.8 million in

Read More ...
Possessing Your Power — A Series on Getting What You Want

“Possessing Your Power — A Series on Getting What You Want” Oftentimes, the seed of power is self-esteem. This document analyzes power and the psychological forces that can add or detract from it. Practical advice on bolstering your self-esteem and feelings of empowerment is dispensed. Power isn’t something we think about each moment of the day. In fact, it probably

Read More ...
Making Time for Growing the Business

Digital Library > Building and Inspiring an Organization > Time management “Making Time for Growing the Business” As any company grows, the number of issues an entrepreneur needs to keep track of grows with it. From basic bookkeeping to thorny tax issues, the paper chase seems endless. It can also be hazardous. "Ultimately, if you want business to grow, you

Read More ...