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10 tips for selling your business in 2021

December 4, 2020 -  By
People in business meeting (Photo: scyther5/iStock / Getty Images Plus/Getty Images)

Plan it out A successful business sale often takes up to two years of preparation. (Photo: scyther5/iStock / Getty Images Plus/Getty Images)

If your New Year’s resolution is to think about selling your landscape or lawn care business, you’re in luck. Here to help you prepare and count down to the sale of your business is Chad Butler, president and principal broker of Landscape Depot Investments in Wellington, Fla.; Joe Flake, former owner of Target Lawn Care, in Paola, Kan.; and Debbie Small, senior adviser in mergers and acquisitions for Apex Business Advisors in Overland Park, Kan.

10. THINK AHEAD. Butler says business owners should start preparing about two years in advance of a sale.

“This gives enough of a window to ensure the financials reflect the most profit and stability,” he says.

9. GET HELP. Flake, who sold his business earlier this year, says it was important that he worked with a broker. He thought his business was going to sell three times before it did, he says, and having someone to help him through the process was critical.

“Having somebody hold you by the hand as you’re walking through the process is pretty important,” he says.

Small says the sale of a business has many layers to it, and working with a broker can be a long-term relationship but one worth its weight in gold.

“We tend to generate an accepted purchase price of at least 120 percent to 150 percent more than owners of companies selling the business themselves,” Small says. “We more than make up for our fee in net proceeds to the seller.”

8. KEEP IT CLEAN. Small says owners should not run personal expenses through the business to reduce their tax burden.

“The more money that they can report on their tax return as profit, the higher value they’ll get for the company,” she says. “I’ve seen everything: Harley Davidsons on tax returns, trips to Walt Disney World. I’ve seen boats. The cleaner the financials, the more likely we’ll be able to maximize the value of the company for the seller.”

7. KNOW WHAT YOU NEED. To prepare your business for sale, Butler says you’ll need to supply some documentation.

“Initially for valuation purposes, the seller will need to supply three years of financials, including P&L statements; tax returns; an employee list with positions and wages; an asset list with year, make and model of vehicles; and a customer list with income and longevity of each account,” he says.

6. WORK ON THE BUSINESS, NOT IN THE BUSINESS. If you’re thinking about selling your business, and you’re still heavily involved with projects, you need to transition to a management role and hire staff for the day-to-day tasks, Small says.

“Most buyers are wanting to run a business from an operations standpoint instead of actually doing the service work,” she says.

5. KEEP IT QUIET. For Flake, it was important that he kept the details about working with a broker to sell his business to himself. If your employees or customers find out before the sale is complete, they may get nervous and jump ship. Butler says if your employees or clients find out, it’s likely your competitors will find out, too.

“We have had instances where an owner insists on letting his long-term and loyal key employees know and somehow it gets leaked out to all of the employees, customers and competitors,” Butler says. “Confidentiality is critical.”

4. KEEP ON KEEPING ON. If you’re keeping a potential sale a secret, you need to continue focusing on the business. It could take up to a year to complete the sale. Butler says it’s a good idea to focus on growing the business during the process.

“It is an important consideration for any buyer to feel comfortable that the business is currently performing the same or better than last year,” he says. “Losing accounts or key employees during the sale process or anytime recently places a risk alert to buyers.”

Flake says he invested in his business with new equipment partially to keep up appearances but also to ensure his future buyer was getting good equipment.

“I didn’t want to (buy new equipment), but I felt like I had to do it to keep up appearances,” he says. “I needed to pass on good equipment to my buyer. I did some things I didn’t want to do just to appear that we were continuing.”

3. KEEP STAFF. It’s a good idea to have critical employees, such as an operations or account manager, sign a noncompete agreement saying they will stay with the business post-sale, Butler says.

“This is an issue with any key employee who may be a high risk to any buyer post-closing,” he says.

2. FAIR AND SQUARE. Small says you need to know what the fair market value of your business is.

“Most business owners think their baby is the prettiest one on the block,” she says. “They have a tendency to want to think that the value of the company is much greater than it actually is.”

Like many brokers, she offers a free valuation to potential sellers to help them get a handle on whether or not it’s a good time to sell. Brokers will work with you to help make your business as attractive as possible.

“If we aren’t at a value that makes sense for them, I encourage them to hold on to the company, increase gross revenue and increase profitability, so we can get that exit number value that makes sense for them,” she says.

1. THINK POST-SALE. Don’t forget to consider what you’re going to do once the deal is done, Flake says.

“I was ready to sell,” he says. “I wasn’t going to take just any deal, but I was ready to personally do something different.”

Christina Herrick

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