I grew up in a family-owned business. While my parents always wistfully talked about selling at some point so they could enjoy life, they never made any plans to do so. Therefore, when my mother was diagnosed with Alzheimer’s and my dad became the primary care-giver, selling the business quickly was critical. Sadly, word of the “fire sale” circulated through the industry, and my parents didn’t come close to receiving the true value of their business. A lesson learned the hard way.

As I travel across the country speaking to small business groups, I challenge them to have an exit strategy in sight even when they are first starting their business. Your ultimate exit strategy influences the direction of your business-;how you manage it and how you position it.

That being said, here are some ideas to consider if you are thinking about positioning your business for sale. 

Who will your business appeal to? Is your business basically an owner-operated company? If so, you’re going to have to find someone who has an interest in that level of day-to-day operations. Selling your business is the job of finding the right individual.

Do you have management in place to run the business so it requires minimal oversight from you? If that’s your situation, it opens up other options for buyers. When your business falls into that second category you can be more creative in your hunt for a suitor. Think about companies who can use your business to achieve better vertical or horizontal integration.

Enhancing another company’s position 

Is there a competitor in another area of the country that would benefit by expanding to your location? Maybe there’s a competitor who would like to snap up your business to gain market share. This would be a horizontal expansion for the company doing the buying.

Does it make sense for a related industry to buy your company to improve its efficiency and allow it to capture value added profits? If you’re retail, do you have a major supplier that would benefit from a retail presence?

If your business is set up to continue beyond your ownership, an investor-;a more local version of Warren Buffet-;could be interested. This is especially true if the sector you’re in offers good cash flow.

To get the best price, you need to do a lot of homework, and this isn’t high school; don’t put your homework off until the last minute. You must find out how similar companies are valued. There are a variety of formulas used for this, and you need to see which typically apply to the kind of business you own and operate. 

Get ready for the scrutiny

Once you understand how a potential buyer will look at your business when you start to negotiate its price, you can do a good job getting it ready to sell. You might need to make a significant effort to improve cash flow, reduce overhead, lower inventory levels, or reposition your business in other ways to attract buyers at a price you can live with. 

Usually buyers will look at three years of profit and loss statements. This is why you need to be planning your end game moves well before you want to make the sale.