Exit Planning

Getting maximum value for your business is about more than timing

maximize business value when exit planning

Almost all business owners ponder when and how to exit their business to get the maximum value. The “when” is often the toughest part of this puzzle.

Many owners think about exiting for decades before they actually do, while other entrepreneurs decide quickly that “it’s time.”

Expert advice on this topic can be confusing. For instance, the National Federation of Independent Business (NFIB) suggests the time to sell is when something forces the owner out. Investopedia recommends selling whenever the owner wants to exit. To my mind, all of this advice misses the point!

Most business owners want to obtain maximum value for their business when they exit. What they don’t understand is that the market determines the optimal time for a sale. And, it is not the economic market or industry forces the owner should watch. For small to midsize companies, forces outside of their industry tend to drive value most strongly. Without this understanding, most sellers will exit at the wrong time.

As important as timing is, it is still not the biggest factor business owners need to take into account when deciding to sell. The way they go about finding a buyer actually drives the value. Unfortunately, most entrepreneurs aren’t even aware of how to do this, nor do they understand who the best buyers are for their company.

Choosing the wrong timing and incorrectly selecting a buyer are not the only issues. Sellers may also not know how to encourage the buyer to pay the true value of their firm.

If a buyer can justify paying a high price — and is able to do so — he or she won’t have to pay that sum unless the seller understands how to get that price. Accountants and lawyers often tell owners to accept a figure with which they are satisfied. While any negotiation that makes both sides happy can be considered successful, should the buyer be a lot happier than the seller?

Keep in mind that in order to obtain maximum value for your business, the negotiation skills you need to have are radically different than the negotiations you have with your vendors and clients. Professional buyers buy dozens of companies every year. Odds are good that you will sell only one company in your career. Attend our webinar on April 26 to learn more about the factors that will maximize your value.

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Category: Exit Planning

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About the Author: Michael Querard

Michael J. Querard is a senior mergers and acquisitions advisor at Generational Group. Mr. Querard has worked with both smaller private and Fortune 500 public companies; with both domestic and foreign firms; and with both strategic and finan…

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