Succession Planning – How to Make Sure Your Business Sells

Is selling your business your succession plan? Selling the business to a third party is the number one exit strategy for Canadian small business owners.

Unfortunately, if you’re a small business owner over the age of 50, that means you’re going to have plenty of competition when you put your small business up for sale.

Today’s blog and the following entries present three ways you can give your small business the competitive edge so you can sell it successfully in a market where so many other small business owners are trying to do the same thing.

Strategy # 1: Make your business as attractive to buyers as possible by adding value.

Prepping a business for sale is much like prepping a house for sale. You want everything to be in tip-top shape.  So first, pay attention to the basics. You need to be able to show a history of profitable earnings with a solid cash flow and a strong balance sheet.  Notice the verb here: “show” as in be able to physically produce the documentation for these so interested buyers can see it.

Then do the necessary repairs. For instance, if your small business has a talent gap in management or staff, hire and fill it. You’ll have a much harder time selling your restaurant if there’s no capable chef.

And just as with a house, extras matter. The house with the ocean view will sell faster, all other things being equal. So if your business doesn’t have an ocean view (that special extra that will entice buyers) you need to create one.

Ask yourself; “What value can I add to my business that my competitors don’t have, and which they’ll have trouble matching?”

Is it a dominant market position? A diverse customer base? Intellectual property or technical capabilities? Strong, committed management?

If you don’t have any of these things, you need to look at creating the kind of added value that potential buyers will be looking for. You might review your product line for new opportunities, explore new markets, or even investigate strategic acquisitions.

RBC  views expanding through acquisition as an often overlooked way of creating business succession opportunities;

“It may seem counter- intuitive to buy another business as part  of implementing a succession plan. But valuations are lower now than they were a few years ago, and buying an attractively priced business today could be an effective way to consolidate market share or expand the business. It could also help attract a higher valuation and more bidders when the economy recovers.” (From downturn to upside; New thinking on business succession for today’s economy. RBC Wealth Management).

Buying a business today may turn out to be your best strategy for selling your business tomorrow.