It would be nice to have a crystal ball and know exactly when to sell your company and have the time to put in place an exit plan, make the necessary changes and exit gracefully so you can maximize the sales price and after-tax proceeds. Before you sell, it’s important to plan well. This list highlights those things that will give you the best return on your time and reap the greatest return on your business sale.
GET YOUR FINANCIALS IN ORDER. Work with your CPA to get your financials as close as you can to GAAP standards. Most reductions in purchase price happen when financials are corrected for missing liabilities, missing expenses or accruals.
DIVERSIFY YOUR CUSTOMER BASE. Incorporate into your sales strategy diversification of clients; plan to minimize customer and industry concentration if possible.
MAKE SURE YOU’RE NOT EXPOSED TO DOUBLE TAXATION. The majority of middle market deals are not stock sales. Make sure that your corporate structure does not expose you to double taxation. The right corporate structure can equate to up to 20% more proceeds after tax from a sale.
UNDERSTAND INSURANCE POLICIES. Know the difference between “claims made” and “occurrence” insurance policies. A change at the right time could save you up to 1 to 3 years of your annual insurance premiums post sale.
CONTRACTS SHOULD INCLUDE ASIGNABILITY LANGUAGE. Contracts. If you have them, add language that allows assignability or as contracts are renewed make that change.
BECOME REPLACEABLE. Empower your staff and management to the level that you are replaceable. This shortens the length of your transition after the sale and creates more value to the company, versus the value of the company being based on you being there.
Take an M & A Advisor to lunch and discuss ideas that you could incorporate today. It will only cost you the price of lunch, but could save you millions. If you are interested in discussing exit strategies further, please contact Tom Kintis at 262-522-8222.
Written by Patrick Wirth, CPA, CVA | Partner
Posted in Mergers & Acquisitions