Get a Head Start on 2024 Right Now.
The end of the year is a time for reflection, and many business owners decide they’re ready to sell their company. Some make it a goal for the new year, but like most resolutions, you’ll get the best results if you start right now.
The holiday season is usually a slow period for many companies, so it’s a great time to get organized to sell your business. Your first step should be to meet with an experienced business broker or M&A Advisor who can help you understand the sales process and help you set expectations about the timeline, your asking price, and your company’s marketability.
Your broker will also help you clarify your goals. There are many things to consider in addition to your financial needs: of course, you’re concerned with maximizing profit from the sale of your business, but also making sure your employees will be well cared for, working toward a quick and clean transaction, and ensuring that your customers continue to receive top quality products and service.
You’ll want to consider what kind of deal will be acceptable to you. Are you willing to hold part of the note on the transaction? Are you willing to stay on in the business for a short transitional period? Do you have key employees or family members in the business who will be a consideration in the deal?
You’ll also need to organize your financials and other documentation that will be requested during due diligence. Year-end means you know what your revenues were and have an accurate picture of how seasonality and the economy impacted your sales. This matters to lenders, who look to P&L trends (not just the current year) to determine risk and decide how much they’re willing to lend.
The U.S. Chamber’s guide to selling your company recommends that you inventory your business, books, and paperwork to make sure that everything is organized, accurate, and easy to access and understand. Most of the delays in deals happen because owners aren’t organized or responsive to requests, or when they provide incomplete documentation for buyers or lenders.
You should also review the number of customers you’re serving. Customer concentration is a red flag for buyers, who know that if your income is dependent on just a couple of big accounts, the company could be in deep financial trouble if it loses even one of them. If your customer base has shrunk in 2023, you’ll need to work on a plan for getting new business early in 2024.
Giving your accountant, financial advisor, and attorney a heads-up about the sale will help them provide you with the best advice they have for the coming year. They’ll let you know what needs to be cleaned up on your books, what you’ll need to be aware of in your contracts and leases, and the tax implications of the sale. You’ll want to go into the year with a clear understanding of what needs to be done and how to structure the deal for the best possible outcome.
You may decide to pay down some debt, invest in an audit or Quality of Earnings report to give buyers more confidence in your numbers, or make some operational tweaks you’ve been considering that will add value to the company. Think about the best way to retain your key employees and make sure business operations keep running smoothly through the transition. Confidentiality is a key factor in a successful sale, so making sure you control when people learn about your plan to sell merits some consideration.
Remember that you’ll also be running your business during the process of selling it. This early planning process will help you over the next few months to focus on the step of the sale you’re in and your long-term objectives. Having a written plan in place means you’ll know whether a decision you’re making will be in line with your goals.
Realistically, most manufacturing companies take 6-9 months to sell once they’re listed. That timeline can slip significantly if there are unforeseen obstacles or issues to resolve. Getting a head start on 2024 right now means you can be on the market early and attract buyers who are ready to make an acquisition in the new year.
