Keystone Business Ventures, Inc. is a small business strategic advisory firm assisting rural-tertiary market business owners in preparing to sell or transfer their business.
Often business owners operate their company to minimize their exposure to tax obligations as well as to maximize value for themselves through “perks”. These strategies may make good sense during normal business operating periods, but they normally do not bode well when trying to create value for a potential buyer.
The business sale process will compel the business owner to adjust their strategic and operational focus in order to maximize their return on investment at the closing table. This adjusted focus normally occurs two to five years prior to offering the business up for sale.
In order to create a strong sense of value from a buyer’s perspective you will need to demonstrate the maximum net profit-generating capability of your business, while maintaining reasonable operating expense.
In other words, your business’ profit-generating capability must minimally demonstrate to the prospective buyer the ability to pay: the new owner a salary at current market rates, the principal and interest of the new debt to acquire the business, the replacement as well as increases in working capital, increases in capital expenditures, and a reasonable rate of return on the down payment and cash injection necessary to continue operating the business as a “going concern.”