Why Prepare Your Company for Valuation (Even if you're not selling)
Updated: Apr 14, 2022
If you're thinking you want to sell a business in the next three years, you should be thinking now about:
How to get your business structured
What are the things you should be doing to prepare
It's important for a couple reasons; One, you never know when the time
will come when a big private equity group walks through your front door and says, "We just bought nine of these. We want you to be number ten." And if you're not ready for that conversation, you're potentially going to miss maybe the opportunity of your lifetime.
You should ALWAYS have your business ready to sell regardless of whether you are trying to sell it.
Two things happen when you prepare your business for sale in our experience. First, when somebody commits to the process, the performance of the business improves because you begin to take inventory of important metrics and data that you may not have had a full view on, which may help you optimize your business or make pricing/programatic changes. It's like the Michael Gerber saying "It's what gets measured, gets improved." Every small business owner should read E-Myth Revisited: Why Most Small Businesses Don't Work and What To Do About It.
And so you're going to improve the operations of the business and you're going to have to do some things that maybe you didn't like doing before as a result of this exercise. Knowing your financials gives you immediate, actionable data.
The Second thing it does is of course prepare your business for sale. This allows you to have meaningful, concrete conversations about your company with confidence so that you can maximize your opportunity and provide the records and data that support your valuation.