A lot of factors come into play whenever we plan to sell or finance companies. The best thing in both the cases is to keep yourself prepared for the ultimate day when you meet a potential buyer or an investor. You should start planning 2 to 5 years in advance before you actually sell your company. Similarly, finding a suitable investor also requires a lot of patience and hard work.
Here are certain things you need to know or do before your sell or finance companies.
Things To Do Before You Sell Your Company
• Meet The Tax and Estate Planner
Retirement is one of the most common reasons why business owners plan to sell their companies. Anyways, it is critical to get in touch with a tax planner and estate planner and discus your plan with them. Let them review your tax and estate situations. Before you sell, there are many things you can do to mitigate your taxes.
• Get Your Financials Ready
Getting your financial statements ready is very essential and you should prepare your financials in such a way that it instantly appeals to the buyers. Remember, it Is not you should be satisfied rather your potential buyers. So, tell them something that can get attracted to.
• Make Your management Team work Independently
Are you the sole “Hero” of your company who does everything single handedly? From accounting to human resourcing to sales? Although it is something that should make you feel proud of yourself but when it comes to impressing the buyer, it will ruin everything. A buyer prefers a business which is self-sustainable – a business that can run smoothly without depending on you. This means, you must fill the various spaces in your management team so that it can work efficiently and independently.
• Minimize Risk
Any loophole in your business can indicate a risk which a buyer will not really like. Right from the beginning, set yourself a goal that you will have to minimize the risk as much as possible, so that when the time comes to sell the company, you don’t need to struggle much to prove how lucrative the deal is for the buyer.
• Talk To An Advisor
Every company is different. Just because your friend has closed a great deal doesn’t really mean that you will also go through the same phase. The challenges you will face may be quite different from what your friend has faced. So, it would be wise to talk to an M&A advisor and allow him to review your business. A good long=-term relation with such financial advisors proves highly beneficial in increasing the value of a business.
• Show Growth Potential
Make a list of all those factors that indicate the huge growth potential of your business. Trust me, a potential buyer would love to see that. Not only will he/she gain confidence in your business but will also give due credibility to it. It is a great asset for your company so make sure you set the right graph of the company right from Day 1.
Things To Know before You Finance Your Company
• Have A Right Business Plan
If you are planning to fund your newly-started business, your biggest requirement would be to have a unique business idea that shows high growth potential. Without a great business plan, it would be impossible to attract an investor. Venture capitalists are used to taking high risk investments but only for those businesses that involve a unique idea with a scalable and sizable market.
• Know Your Finances Well
Investors find confidence when they see that the entrepreneur is fully aware of his/her financial situations and requirements. You must know how much you need and how you are planning to utilize the fund they have invested. It’s better not to raise too much capital at the first round. Venture capitalists offer several rounds of financing, so no need to ask for a huge fund for the initial operational cost.
However, also make sure that you are not too modest to create doubts in the mind of the investors. Simply ask what you think would be sufficient for your initial round. Your confidence is very important to help the investor also have confidence in your company.
• Put Your Personal Savings To Use
Financing companies becomes much easier when you show the investors a significant contribution from your side as well. If you have enough personal savings, try to take charge of at least 25% of the financing, or if that is unaffordable then 10% at least. This will make the investors realize your commitment to the venture and encourage them to come forward without much apprehension.
Either you sell or finance your companies, at the end of the day, the sole objective is to make huge profits. Make sure you sell your company when its performance is at its peak. That is the point where a business looks most attractive. Isn’t it?
For more information on selling or financing your companies, feel free to visit http://mergeralpha.com/
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