Maximizing Value When Selling Your Entrepreneurial Business

Once an owner has decided it is time to make a change in the company's ownership, the owner usually seeks advice from financial advisors. The owner reviews the tax returns and financial statements for the past few years. Owners' thought processes lead them to set a bottom line price before seeking a valuation. After a valuation is performed by a qualified professional, the owner typically is in "shock". The company documents do not support the owner's value. Typically a company's value maybe understated based on the documentation. Many investor owned, privately held companies manage through emotional decisions rather than by the numbers. Owners should rely on the advice of professionals and fully document their company's operations before they decide to sell.

Reposition the Documentation.

1. Maximize the EBITDA by applying financial ratios. Go beyond the usual cost cutting and receivables management. Understand how management of the financial ratios may change the bottom line.

2. Fully document the use of add backs. Include all add backs to maximize the value of the company.

Reposition the Operations.

1. Reposition the operations so that 80% of the annual revenue is contractual, reoccurring revenue.
2. Eighty percent (80%) of the customer base should generate a majority of the company's revenue. A company is less valuable when a majority of the revenue is generated by 20% of the customers.

3. Create management depth. Adding an operations manager, trained to handle the day to day operations, identifies management strength to a prospective buyer and spreads the perception of customer loyalty to the company, beyond the owner.

4. Determine the risk factors associated with the owner's ability to grow the company. The owner can increase the value of the company through the development of a plan to reduce and eliminate risk factors. Reposition the company's weaknesses as opportunities by altering management strategies.

5. Prove the value of a company through acceptable documentation and turn a buyer's skepticism into confidence.

Contact HIS CPA PC (A Christian CPA Firm) today. Award Winning Atlanta CPA. John Dillard is an Christian Speaker/Author and Certified Public Accountant in Duluth, GA. To See how he takes Christ along with him to work visit http://www.hiscpa.com/   and for his latest book Overcoming Life's 9/11's: Job's Journey and a Voice of One: Nehemiah's Prayer visit http://www.john-dillard.com/  (All Rights Reserved) Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!