Sell your Business - Functions that affect Business Value
Posted by Tom Gledhill on Fri, Jun 10, 2011 @ 01:14 PM
Selling a business is a process and in our Selling Your Business series we’re going to examine each step in the process that an experienced broker/advisor uses. There are basically 7 steps in the business sale process and in this article we’ll discuss step 1 in the process.
The first thing we need to do is determine an approximate value for the business. Consequently, the first step in the ”Selling your Business” process is to completely ANALYZE THE COMPANY. So follow along as we examine those functions that affect business value:
1. The first thing we’ll look at is your MISSION statement – do you have one? What is it? How has it defined your company?
2. Define your PRODUCTS & SERVICES – how many do you have? What are the top sellers? If a Service – special educ/licenses required? Resell – provide installation, training & support?
3. How many CUSTOMERS do you have?– are they one time or repeat customers? If applicable, do you have a customer contract? How many customers represent 50% of total revenue?
4. How many SUPPLIERS do you have? Do you have backups for your primary suppliers? Do you have exclusive rights with any of your suppliers? What kind of relationship do you have with your suppliers. Do you have contracts with them?
5. Are your SYSTEMS & PROCEDURES efficient & documented? – Are they automated? Do they run smoothly?
6. Are your FINANCIAL STATEMENTS ready and available?– Do you use quickbooks , Peachtree or other accounting SW? Does your accountant provide financial statements? Are they compiled, reviewed or audited? Are you on the cash or accruel method of accounting?
7. Identify your PERSONNEL – How many employees do you have? Do you have an Organization chart? Do you have Key employees who are very important to the business? Do you have Non-compete agreements? What benefits do you provide?
8. MARKETING & SALES – What marketing venues do you use? – direct mail? Internet? E-mail? Do you employ Salespeople or use sales rep firm? What is your target market area? Is it local, regional, or global?
9. GROWTH – Is the business growing, declining, or flat? Why?
10. What is the INDUSTRY SECTOR – manufacturing, distribution , business service? What is the SIC code?
11. COMPETITION – Who are your competitors? What challenges do they present? How do you compare?
12. LEASES – Do you have a lease? Is it transferable? Is it in writing? What kind of a relationship do you have with the landlord?
13. OTHER – Are there other functions that are particular to your business? What are they? How would they affect value?
This concludes the discussion of STEP 1 in the business sale process. In the next article we’ll discuss STEP 2 in the process which is to determine an approximate value for the business.
To view the video of this article click Analyze the Company