How Is The Credit Crunch Affecting The Sale Of Your Business?

Who would have thought that a credit crunch originating in the USA would affect your ability to exit your business profitably in another country? Yet that is exactly what can happen if you are planning to sell your business without proper preparation in the form of a holistic business plan.

Despite the best efforts of governments around the world to free up credit markets, access to credit is still tight, with financial institutions carefully scrutinizing small business access to funding and therefore limiting the pool of potential buyers for your business.

If you’re a business owner who is planning to sell your business in the near future, the chances are that your ability to sell at the price you want and deserve will be directly affected by the your buyer’s capacity to obtain finance to fund the purchase.

Financial institutions are reported to be lending on business acquisitions right now, however only those businesses with proven financial viability and profitability, together with strong asset backing, will be in the running for loan approvals.  This presents a succession problem for you as a business seller who desires to exit your business in the near future.

To overcome this dilemma you want to prepare your business exit thoroughly and cover all options to ensure your sale can proceed in your timing and on your terms.  In my book ‘Your Business Succession’ due for release on 31st January 2010, I detail literally dozens of strategies to help you avoid or overcome business succession problems, and below I offer 7 strategies to help you prepare to sell your business profitably regardless of a credit crunch.

7 Strategies To Prepare Your Business For Sale In A Credit Crunch

1.  Assemble a reliable set of financial statements, prepared by your Certified Practicing Accountant, to  substantiate at least 3 years of your business performance.

2.  Increase your business cash flow with a reliable income stream.  This may mean formalizing service agreements with your customers or introducing product or service lines to increase business income.  It may also mean reviewing the pricing of the products and services you already provide.

3. Examine your business expenses and cut costs wherever possible.  Financial institutions will be looking for proven lean operations before providing funding to a potential buyer of your business.

4. Consider Vendor Finance options that enable you to facilitate the sale with potential buyers. Remember this effectively means you will become the banker on the sale, so you need to protect your interests with assets, insurance and a legal agreement.

5. Don’t forget to consider staff within your business as potential buyers. They’re in the best position to appreciate and understand the value of your business and are usually more prepared to pay the price you’re asking.  Think about arranging an Employee Share Ownership Plan (ESOP) to facilitate a buyout by your best staff.

6. Prepare a feasibility study of the future prospects and potential of your business and target market to impress financiers and save your buyers the trouble.  As the business owner, you’re in the best position to describe your competitive advantage and can best present the value that your business offers to future owners.

7. If you haven’t had time to implement the above recommendations, consider delaying selling until you can prepare adequately. If you want the best price for your business sale, forward planning in the form of a holistic succession plan is essential to ensure your business is operating at optimal profitability.

How prepared are you to sell your business for maximum cash flow and profit?

Invest just 3 minutes of your time to complete the online assessment and receive your FREE customized report with an instant explanation and “To Do List” to complete your Business Exit and Succession Plan at http://ybsProfits.com/quiz.php

To Your Profitable Business Succession,
Leigh Riley

Succession planning is really about developing your business for something better …

Why did you take the risk of going into business ? Was it simply to  provide yourself with a job?  I’m betting that your reason behind starting a business was to build yourself an asset that would one day provide you with a great lifestyle – a lifestyle that offers Something Better!  Am I right?

So in troubled times, when sales are dropping off, think not of lowering your prices.  This may attract more sales in the short term but the reduced profit margins also have the potential to reduce the value of your business.

If you want something better from your business in the future, you want to focus on staying steady and true to your business mission – to build something better!  Take notice of some valuable wisdom, that I quote from the great John Ruskin 1819 -1900:

“It is unwise to pay too much.  But it’s worse to pay too little. When you pay too much, you lose a little money, that’s all.  When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.

The common law of business balance prohibits paying a little and getting a lot.  It can’t be done.  If you deal with the lowest bidder, it is well to add something for the risk you run.  And if you do that, you will have enough to pay for something better.”

Something better – worth working for, worth planning for. How prepared is your business to generate something better for your future? Find out with a FREE online assessment with customized report emailed directly to you.

To Your Profitable Business Succession!
Leigh Riley

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Sole traders deserve a profitable exit strategy too

If  your business has no employees, and your family members are not interested in taking over your business when you leave, what is your best exit strategy to make sure you actually receive the cash flow and profits you’ve worked so hard to earn?

If you are a sole trader you may believe that you are at a disadvantage when leaving your business, but there are many options to help you  maximize the value of your business and therefore maximize the return on your investment.

7 tips for a profitable sole trader exit strategy:

• Make sure your business has a proven track record with financial accounts  and tax statements to verify the income and profits of your business.

• Keep your place of business organized and attractive.

• Document all client records, including contact details

• Establish and document systems for all procedures and processes to make it easy for someone else to fulfill your role when you exit your business.

• Communicate your success to your business associations, competitors and trading partners to make it a well known that your business is an attractive purchase proposition.

• When considering potential buyers don’t overlook the newer graduates and trainees that you meet at business associations. They may currently be working with your competitors, but aspiring to own their own business one day.  You can portray your business as an easier path to owing their own business with instant income, rather than building a business from scratch.

• When you’re comfortable, approach someone in your network to enter into an agreement with you to buy your business one day upon specified events occurring.  The events can be agreed with terms to include retirement or another matter causing you to leave the business,and the term should also include events such as sudden illness, accident or death.

This strategy will allow you to agree on a price for the time when you exit the business. Your agreement should include the terms of sale, and can even make provision for funding the purchase price.  This is known as the ‘friendly rival’ strategy.

Benefits of the ‘friendly rival’ exit strategy for sole traders

Any agreement you set up should be arranged by a team of experienced business exit strategy specialists and should make provision for the changing value of your business.

Due diligence must be given to the tax implications upon changeover.  The agreement should also provide for terms to protect your business asset from the contingencies, with insurance to cover sudden illness, accidents and death.

Putting a ‘friendly rival’ exit strategy in place will allow you the comfort of knowing you have a certain buyer when the time comes for you to leave your business, no matter what the circumstances. This will also provide you with assured financial security in the form of both cash flow and profit int the future and remove the pressure of finding a buyer if you ever have to leave suddenly.

FREE online tool to evaluate your exit strategy:

Start with the end in mind and sharpen your business strategy in a way that will enhance your proitable exit . Invest just 3 minutes to complete the FREE Business Succession Readiness Quiz and receive your FREE customized evaluation, plus a ‘To Do’ list of specific actions you want to take to ensure your profitable exit from your business.

Take the quiz now

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