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Attract buyers before youre ready to sell

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Attract buyers before youre ready to sell

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									Attract buyers before you’re ready to sell



                No matter where your firm is in its life cycle, you need to think about how
                you might eventually sell it. If your business is relatively new, this may seem
                like putting the cart before the horse, but consider: The characteristics buyers
                find attractive are also the ones that build a strong and profitable professional
                services firm. And, when you decide you’re ready to sell, you won’t have to
                invest as much time or money to get it ready for the marketplace.

                But, before you even think of putting your firm on the market, you need to
                know what you want out of the deal.



                Know your mind
                To prepare your firm for sale, you must first prepare yourself. Most owners don’t
                spend a lot of time thinking about what they want from a sale. The financial
                rewards are only part of the deal. You also need to consider the functional,
                organizational and emotional aspects.

                For example, what role will you want to play in the newly acquired firm? How
                long will you want to continue working for the acquiring firm? Will you be able
                to accept being low(er) man or woman on the organizational totem pole? And
                can you start letting go of some of the long-standing client relationships you
                have built without fainting?

                Once you have a clear picture of these areas, you can negotiate harder for what
                you want and likely get a better offer.

                Understand what buyers really want
                Begin preparing your firm for eventual sale by thinking about what’s appealing
                to buyers, and then adjust your firm accordingly. Several factors are important to
                most acquirers:

                Steady growth. When expenses are in line with revenues, regular increases in
                the top line mean buyers can expect a good return on their investment.

                Diversification. Generally, having several really good customers is preferable to
                having one major one. For example, buyers will look elsewhere if 30% (or more)
                of your business comes from one client.

                Profitability. Buyers know that increased market share doesn’t automatically
                translate into higher profits. They value a tried-and-true formula of careful cost
                control and wise investments that bolster the bottom line.
Attract buyers before you’re ready to sell



                 History of innovation. Professional service firms that demonstrate they can attract
                 new clients or expand relationships with existing clients through new service offerings
                 and skills can enhance your value. This includes enhancing organic growth through
                 acquisitions.

                 Niche player. Firms in specialized niches are more highly coveted than those that are
                 good at many things. Generally, buyers prefer a targeted firm around which they can
                 build bigger operations — or make additional acquisitions.

                 Strong management. Buyers pay a premium for businesses that demonstrate they
                 have quality leadership and relationship owners. Having such qualities assures the
                 buyer that the client relationships, on which the purchase price is based, will likely
                 remain in place and keep the firm growing after the buyout.

                 Prepare to sell
                 Because you invest so much time in your firm, you’re probably its greatest expert. But
                 chances are most potential buyers are more experienced in and knowledgeable about
                 buying a professional services firm than you are in selling one. You can, however, take
                 steps to close this gap when you’re ready to sell.

                 First, enlist the help of professionals — including attorneys, CPAs, and investment
                 bankers or business brokers — with expertise in business sale transactions. Then talk to
                 other business leaders who have sold their companies and can provide tips based on
                 personal experience.

                 It’s also important to build name recognition. If your firm name isn’t familiar, it’s
                 harder to create a competitive bidding situation. But if your firm is viewed as a market
                 leader, you can generate interest from multiple buyers and drive up bidding.

                 Next, get your house in order. Make sure you have:




                 Finally, know your firm’s weaknesses. Assume that any negative information will come
                 out during the due diligence stage. So try to address these issues in advance.
Attract buyers before you’re ready to sell




                 Enlist the help of the pros
                 No matter where your firm is in its life cycle, prepare now for its eventual sale.
                 The characteristics that buyers find attractive are the ones that build a strong
                 and profitable company, including steady growth, customer and geographic
                 diversification, a history of innovation and strong management. When
                 you’re ready to sell, you can increase the chances of getting a good offer by
                 enlisting the help of experienced professionals, building name recognition and
                 understanding the business’s weaknesses.

                 Ask the hard questions now
                 Before speaking with a potential buyer, anticipate the kinds of questions —
                 personal and business — they’ll ask and be prepared to offer a satisfactory
                 answer. These include:




                  special projects rather than day-to-day operations? Or do you have other goals
                  that may require special considerations from the new owner?




                  significant staff expansion?

								
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