If you’ve calculated your adjusted EBITDA and aren’t happy with the result, change it. The average business owner needs three years to get his business ready to sell. This is a reasonable amount of time to increase the value of your business. Make a plan to bring this number up to something you can live with.
You might have built your company with your bare hands from the ground up, but trust me, this is not a plan you want to make alone. An investment banker, broker or other advisor who buys and sells businesses for a living can help you avoid wasting time and money and help you create an effective, focused plan that will deliver results.
This plan will include four specific elements:
1. Strategy for growing revenue and earnings
Any potential buyer is going to want to see consistent growth. If your earnings fluctuate up and down over the years, that’s a red flag and you’ll have a hard time convincing a buyer to stick around. Buyers want to see consistency in the upward direction.
2. Implementing a solid management team
Your managers need to not only be able to run the business without you, they need to be able to do it well. This will start by having the right people on your team and having those people in the right roles. Now, I know your son is a great kid. However, if he knows nothing about sales and he’s leading your sales team, he’s going to be a liability. Potential buyers want to see a business they can ease into without worrying it’s going to collapse while they’re getting up to speed.
3. Dealing proactively with customer concentration issues
We discussed this issue in our last post. No one client should represent more than 20 percent of your business. If your company is leaning too heavily on any of your current customers, get busy bringing in new business while continuing to serve well the customers you already have.
4. Continuing to invest in your business as though you aren’t planning to sell
Look at your business through the eyes of your potential buyer and continue building value. If you start cutting back on your investment into your business, your growth and your people will suffer. You don’t build strong businesses by backing off and if your business isn’t strong, don’t expect to attract buyers — or a good price.
Speak with an expert about transitioning your business.