An Innovative Forecast: Is Your Company Investor-Ready?John was thinking about retirement.
His small, profitable company employed a half dozen people, and it seemed they were all in his office today – asking questions, complaining, or just making conversation.
Time to figure out what the business is worth and develop an exit strategy.
John is not unique. Most people do not go into business thinking about getting out. And many don’t know their business value. So what is an exit strategy and how do you know what your business is worth?
Your Business Exit Strategy
An exit strategy is a plan for the business to be transferred to a new owner or liquidated. Most business owners assume that someday they will retire and the business will be run by someone else.
A business exit plan may include plans for a public offering, strategic acquisition, or management buyout. As a business owner, you’ll need to keep your exit strategy in mind as you manage the business day-to-day
Want more information on developing a business exit strategy? Here’s a great summary: Eight Ways to Exit Your Company.
Your Business Valuation
Ideally, an exit strategy is part of the initial business plan for any company. If you didn’t include that in your initial business plan, a good place to start is with a business valuation.
You can hire a seasoned team of accountants that will spend time with you and your management team, producing a valuation number with recommendations for improvement.
With current technology, you can also use software available online to get a valuation. Using a software package instead of a team of professionals means no employee and management interviews but does give you the opportunity to learn the aspects of your business that are considered in a valuation and recommendations for improvement in value.
Plus, valuation software tools allow you to manage the process at your own pace and in the privacy of your own home or office.
It’s important to get into a potential buyers head when preparing to sell your company. There are several characteristics that buyers review when getting ready to purchase a company.
Your Value Drivers
A business valuation gives you great insight into the inner workings of your company. These value drivers include:
- Financial Performance
- Organizational Structure
- Employees and Leadership
- Strategy and Planning
- Environment, social, and company governance
Understanding how these factors affect your business allows you to make any needed changes to increase the worth of your company.
As a small business owner, you’re busy keeping that business profitable. With a complete business valuation that includes recommendations and strategies for increasing value, you can be assured that when it comes time to exit your company, you’ll get the best price.
Whether you choose to hire a team of seasoned professionals or use business valuation software to determine your company’s worth, this plan is an important part of your exit strategy.
Quist Valuation is a leader in valuing companies, both with in-person, in-depth reporting and in their business valuation software Quist Insights.
If you have any questions about increasing the value of your business prior to your exit, please contact us to discuss your particular situation. We can help you identify and strengthen the current Value Drivers in your business, install additional Value Drivers, and create a roadmap to meet your overall exit objectives. We also have additional resources that explain Value Drivers in more detail.
If you’d like more education on our entire range of business valuation topics or wish to discuss transfer planning in general, please Contact Quist.