CEO Advisor Newsletter October 2015
Start Now to Prepare to Sell Your Business Next Year
- Developing an exit strategy
- Creating an effective Executive Summary and 3-year Forecast
- Creating a PowerPoint presentation and 30-second pitch
- Identifying a complete list of potential buyers with the proper contact information (100 - 200 buyers in order to attract 5 - 7 interested parties and 2 - 3 letters of intent)
- Updating the capitalization table, organization chart and sales forecast
- Initiating telephone and email contacts with the many prospective buyers multiple times
- Negotiating and formulating letters of intent
- Advising you through the arduous due diligence process and legal documents
- Keeping the sale on track by working with your attorney, tax advisory and buyer, while you continue to run your business effectively and contributing to the sale.
Clearly your advisory team is paramount as you should not be sacrificing your business where your expertise lies, and trying to handle the approximately one hundred tasks above if this is not your expertise. Additionally, your business advisor needs to be a negotiator and bad cop, while you remain the good cop and close the transaction as a key (likeable) player in the acquiring business going forward.
2. Start Your Preparation Game Plan
Your business advisor will be the most instrumental in working with you to get your business to optimal value. The length of time this preparation takes depends on your preparedness at the start of this process, but don't waste time trying to do the preparation on your own if this is not your specific skill set or expertise.
Having an understanding of the selling process is key, understanding valuations, what your role will be, having your strategy, accounting reporting, sales reporting, forecasting and other aspects of your business on track and complete are critical. Your business advisor will work with you on all of these areas of your business and more to ensure the optimal opportunity to complete a sale and maximize your valuation.
3. Valuations, Tax Issues and Other Non-starters
Have your business advisor research recent valuations and comparables in the market to make sure everyone is on the same page and expectations are realistic. Of course, your company is unique and has its competitive advantages, but buyers are sophisticated and have a fairly rigid process in how they value and acquire companies so you need to understand the sale process, as well as, realistic valuations and terms in today's market.
No one is going to pay you 100% cash up-front and send you to Tahiti for the rest of the year. Price and terms are critical to every deal and your business advisor will play a key role in negotiating both price and terms throughout the sales process. Tax issues are also critical so discuss a realistic sale price with your tax advisor, explain your corporate structure and whether you are a C corporation, S Corporation or LLC and gain input on the tax burden scenarios as a stock sale vs. an asset sale.
These 3 important steps will ensure that your many years of hard work translate into an optimal opportunity to realize your life's dream and gain the largest payday of your life. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation at 949-629-2520, by email at MHartsell@CEOAdvisor.com or visit www.CEOAdvisor.com for more information.
Attention CEOs - Start Planning for 2016 Now
- Here are 7 key issues that typically cause major issues in a business or lead a CEO or business owner to decide to exit the business, usually through a sale or liquidation, in an unplanned sale or at less than desirable results. Planning now for 2016 will head off these issues for a more productive new year.
- 1. Lack of Operating Capital
- Lack of cash to meet short-term cash needs is a major burden and sometimes crippling to businesses and their CEOs. Also, cash shortages preclude funding essential for business growth. Serious cash needs also cause short-sighted actions and even bad decisions.
- 2. Management is Too Thin or Less Than Competent
- The CEO can be so tied to the business with no additional resources for the CEO to share management responsibilities. Thus decision-making, sales, marketing, operations and growth are restricted to the CEO's abilities and available time.
- 3. Lack of a Business Strategy and Business Planning
- There is no strategic business plan, financial forecast and goals to focus resources effectively toward results and to increase sales and profits. This is critical and rarely done consistently in small business today causing a whole range of problems.
- 4. The CEO is Seriously Ill or is Disabled
- Being prepared for the calamities that can ruin a business is a responsibility a lot of business owners do not take seriously enough. Insufficient financial and management preparation for the death or disability of the CEO can create chaos for those left to sort out the issues. A trusted business advisor familiar with the business can be an extremely valuable resource to any CEO or business owner to act in an Interim CEO role, as needed.
- 5. There is Disproportionate Risk through Personal Guarantees or Expenses Tied to the Business
- Because of personal financial guarantees required for the business or considerable fixed expenses, especially in an economic downturn, a major crisis could ruin the business owner.
- 6. The Business is No Longer Satisfying or CEO Fatigue Sets In
- Many CEOs and business owners reach a point where they no longer wish to endure the pressures of the business or the risks related to the business. They have lost their enthusiasm and commitment to continue to invest in and grow the business.
- This condition is not only an impediment to growth, but it often creates a downturn in the business that puts the company in a vulnerable position. An interim, part-time CEO or business advisor may be the alternative that works best outside of a sale of the business.
- 7. The Assets of the CEO or Business Owner are Unbalanced
- Most personal assets are in the value of the business. Little independent retirement savings have been established for the CEO/major shareholders in the event of a business downturn. In the absence of a strategic buyer, the sale of the business is required as a retirement alternative.
- CEO Advisor's business consulting services can help you overcome these issues enabling you to grow your business to the next level, or explore your alternatives. Contact CEO Advisor for a no cost, no obligation initial consultation at your office by calling Mark Hartsell, MBA, CEO at (949) 629-2520, by emailing MHartsell@CEOAdvisor.com, or visiting our web site at www.CEOAdvisor.com for more information.