Value of a business plan for your business for sale.

December 24, 2009

Year end is a great time to be prepared for the next year.  This is no different for the owner preparing for the sale of a business, though the strategy and focus may be a bit different.

A business owner preparing to sell should also be prepared to run the business forever.  It may not sell or sell as fast as the owner prefers.  If it does not sell, the owner wants the business to be producing for her own benefit going forward.  If it does sell she wants the business to be the very best it can be to maximize a gain.  As we come off a lousy economic year, this new year can be no more critical for most businesses.

When the year’s plan is developing, there are likely key goals you want to gain.  Clearly identify them. Don’t be hesitant to set goals into the future.  A prospective buyer will be interested in how the experienced owner foresees the future.  To meet those goals, a typical business plan includes these broadly defined components:

Marketing

Financial

Operations

Personnel

In a year of economic recovery as 2010 is predicted to be, owners wanting to sell should be focused on building their core business, the one that is most likely going to put income on the bottom line.  They can not ignore growth and perhaps diversification opportunities as these demonstrate the future opportunities for the company, a very appealing component for prospective buyers.  When devoting resources to new opportunities, businesses for sale should be prepared to demonstrate the income and resources devoted to exploration, preparation and execution of new products or services, whether implemented or not.  This financial information should be clear to a prospective buyer. It can help justify a higher sale price.

Planning for key personnel to be in the correct positions and performing well, even if the management method is team or rotating.  Make certain it is designed and implemented the best it can be.  Personnel are, in most organizations, the key to maximizing profits and maintaining the order of the business.

Prospective buyers typically pay for profit, gain to owner and are likely to pay more if the organization can clearly demonstrate financial and operational performance. Keep track of one-time expenditures, if clearly identified they can demonstrate additional profit a new owner can count on, pay more for.  If current owners are taking cash out of the business.  This is the year to stop.  Cash not recorded is not something a buyer should pay for.  Personal expenditures must be clearly identified to justify a buyer paying more for the business.  Neat and tidy counts.

When you have a business for sale, operations MAY focus more on maintaining equipment than replacing it, streamlining existing methods rather than experimenting.   This does not permit slacking on being the best you can be.  Remember the prospective buyer wants to see a great operation with equipment and people doing well. Inventory methods should be in order.  Clearing out the unneeded, unsaleable, unusable should be part of the operational plan.

A key goal may be to improve the name recognition in the market place and establish a clearly defined culture.   All of this is to enhance sales and the sale of the business.  The owners marketing plan should reflect these goals.

Some merely do this planning stuff in their heads.  The owner working to sell a business should write it down, follow, engage the right folks in preparing it and share it where it makes sense, tweak it throughout the year, and be ready to show it to your business broker and anyone who is clearly interested in buying the business.

What more should be part of this plan?

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