You’ve determined that it’s time to sell your itouch repair business and you want to earn the highest possible price for it. That requires you to spruce things up a bit: streamline operations, lower debt, create business plans and in general give the financial statements a trip to a health spa. This makeover can add value to your company and actually improve the quality of your firm. The better the management of the company, the quicker it will sell. So ask yourself, what do buyers want to see in order to evaluate your company?
A financial buyer will be looking to finance most of the purchase price of the company, using the company’s cash flow to repay the financing. You therefore want to maximize your cash flows. These buyers will put a three to six times multiple on earnings before interest and taxes (EBITA) after adjusting for expenses that will not continue with the new management. They subtract from this figure any interest-bearing debt they will assume with the company, so you may want to get rid of your debt before putting your firm up for sale.
On the other hand, a strategic buyer will want to combine your business with others and achieve certain synergies. They may be competitors who already know the industry and want a crack at your confidential information. For instance, you may keep a secret list of sales leads that can be very valuable to a competitor. So you must be cautious dealing with a strategic buyer and make sure not to give away any proprietary information before the sale is complete.
Of course, all your financial statements must be audited if you want to appear credible to a buyer. Bankers will not finance a deal without high quality, audited financial statements. However, if you are a very small business, it is likely you don’t have audited statements, so if your buyer insists on them, have him pay for them. In all cases, you want statements going back at least three years (assuming you’ve been in business that long) that reveal all pertinent information regarding sales, profits, depreciation, expenses, inventory, receivables, and all other important financial aspects.
Finally, make sure that you have a management team in place that can run the company without you. The new owner may or may not want to replace them, but having them there will reassure the buyer that your company can survive the loss of you.