How to get market value in cash for your business
When selling your business, the most crucial factor is finding a buyer willing to pay market value in cash at closing. Many business owners end up working for their former companies for years post-sale or experience a high dissatisfaction rate with the transaction—nearly 70%. This often happens because they settled for less than they wanted. Here’s how to avoid that pitfall and ensure you get cash at closing.
Types of buyers
External Buyers: These buyers are often willing to pay market value for businesses that are turnkey and ready to operate without major changes.
Internal Buyers: These buyers, such as employees or partners, can be viable if given time to arrange financing.
Preparing your business
No matter who the buyer is, it's essential to have your business in order. Prospective buyers will scrutinize every detail of your financials, operations, employee agreements, legal contracts, and banking terms. Any gaps in documentation or preparation can lead to prolonged negotiations. By preparing thoroughly, you can position your business to command market value and negotiate effectively.
Understanding tranches
Cash in hand doesn’t have to come all at once. A transaction can be divided into segments, known as tranches, which can make large deals more feasible. For example, an internal buyer might start by purchasing a small ownership stake using their existing assets as collateral. After paying off this initial purchase, they can use their newly acquired ownership as collateral for subsequent, larger purchases, gradually buying out the business in full. This way, you receive cash at each stage while maintaining control until the final transaction.
Independence from the owner
Buyers want a business that can operate independently of the selling owner. If the business relies heavily on your personal involvement—whether for generating new business, performing specialized tasks, or maintaining key relationships—you’ll need to extract yourself before selling. The business must demonstrate proven performance without you to attract buyers and achieve market value.
Maximizing value
The value of your business is linked to its performance without your direct involvement. Invest time in developing and proving the business's success independently. The stronger and more autonomous the business, the more appealing it will be to buyers, resulting in a better price.
If you’re ready to prepare your business for a sale, contact us now. We can help you get started and maximize your business's value. You can also take our free online Transaction Readiness Survey to assess your readiness and identify areas for improvement.
Kommentare