A small business owner named Simon understands how the cash flow of the business drives his current income, and as well how it would eventually impact the valuation and sale price. However, Simon lacked awareness of elements of potential exit routes that demand cash flow.

A significant reliance on one or a few customers will directly impact your business's sellability. A high level of customer concentration is risky for a potential buyer who will request a customer concentration list as part of their due diligence process. A wise approach to strategically building a business that is indeed sellable and to being prepared for a future sale transaction is to create and manage a customer list as part of your ongoing business management process.

The recent Connelly v. United States Supreme Court decision provides critical insight for closely held business owners considering succession planning and tax implications.

Small businesses stay small either by choice, or because they start chasing growth in the wrong places.

When you strip away the layers, it all comes down to darts.

Imagine a dart board with a bull’s eye and around it is a series of wider and wider circles. The bull’s eye is where the people just like you hang out. They are the people (or businesses) who feel the problem your company set out to solve. They are usually your first customers and raving fans.

The further you go outside of your bull’s eye, the less these prospects feel your exact pain.

Emily has been in business for 10 years and has plateaued in both revenue and profitability. Her exit planning advisor Mary has learned that she wants to exit in 5 years and how much $$$$ she will need net of taxes in order to exit successfully. An estimate of business value has revealed that her business is worth about 50% of what it will need to be worth for Emily to head off to Hawaii in 5 years in the way she wants to.

In business, one key aspect often separates successful ventures from those that struggle to thrive: systems documentation. It's the roadmap, the blueprint outlining how a business operates, from its day-to-day processes to long-term strategies. In a recent ExitReadiness® PODCAST episode with guest Jason Henderberg, we discussed how meticulous system documentation can significantly enhance a business's value, ultimately paving the way for a higher sales multiple.

A Certified Business Valuation is a comprehensive assessment conducted by a qualified professional to determine the fair market value of a business. It involves a systematic analysis of various factors such as financial statements, industry trends, market conditions, company assets, intellectual property, customer base, and other relevant aspects to estimate the worth of a business.

Every sale of a business requires negotiation.  The buyer is purchasing the future potential of the company and is aware that they can only learn so much in a due diligence process.  The seller’s strong management team, documented procedures, and portfolio of recurring revenue clients, and other value drivers will move a buyer forward. And, if a seller wants to further strengthen their story at the negotiation table they will be prepared with a documented strategic plan for future growth.

Can you leave your business for a month, sit on the beach and leave your phone in the beach bag?  If so, you have attained what few business owners do – a business that can run without you!  Aside from sound cash flow, the creation of a management team is the most significant driver of business value.  When the time comes for you to leave for good, a buyer wants your team, not you!  If you can’t yet take that month, here are a few simple thoughts…

The term “earnout” is often mentioned by an advisor or business owner when describing the terms of a business sale. If an owner has as part of their deal an earn-out, they have been asked by the buyer of their business to stay on for a specified period of time in a senior leadership role within your acquirer’s company. In this role, they will be charged with achieving a set of goals in the future (i.e., revenue or profitability goals) in return for additional compensation for their business. This approach is used when the successful operation of the business being bought is dependent on its owner, and/or the buyer needs to bridge the gap between what they are willing to pay for the business and the amount of money the owner wants for the business.

A small business owner named Simon understands how the cash flow of the business drives his current income, and as well how it would eventually impact the valuation and sale price. However, Simon lacked awareness of elements of potential exit routes that demand cash flow.

Fidelity Investments is an international brand and one of the most valuable privately held businesses in the world. 

Founded in 1946, Fidelity Investments celebrated 75 years of business in 2021.  Through their 52,000-plus associates and global presence, they serve 40 million individual investors, manage employee benefit programs for nearly 23,000 businesses, and support more than 3,600 advisory firms with investment and technology solutions.  Since its inception, Fidelity has experienced consistent and impressive growth.

Sarah wanted to exit in 5 years and had learned through planning and analysis led by her exit planner what “her number” was, as well as an objective estimate of the value for her business. She was pleasantly surprised to find that the financial gap for making her post-business dreams happen is not insurmountable. At the same time, she is aware that growing the value of the business (Sarah’s largest asset) will be necessary to close the existing gap.

For many, January is a time of rebirth and resolutions. It’s a month to reflect on last year’s achievements and to set goals for the year ahead.

Some people will set personal goals like losing weight or quitting a nasty habit, and most company owners will set business goals that focus on hitting certain revenue or profit milestones. But if your goal is to own a more valuable business in 2019, you may want to make one of the following New Year’s resolutions:

If you’re trying to figure out what your business might be worth, it’s helpful to consider what acquirers are paying for companies like yours these days.

A little internet research will probably reveal that a business like yours trades for a multiple of your pre-tax profit, which is Sellers Discretionary Earnings (SDE) for a small business and Earnings Before Interest Taxes, Depreciation and Amortization (EBITDA) for a slightly larger business.

As a business owner you pour your heart into your work and it has become part of you. But at times, the business you have carefully nurtured for years can become a burden - there's a part of you that yearns to do something else - travel, spend more time with family, enjoy more leisure, or even start another new business. You are confused. 

So when it comes to considering the future of your business, where is your heart?