Someday you’re going to want to sell your practice. Your clients will want to sell their businesses someday. You (and they) can either let it happen to you or make it happen for you. The difference can be tens or hundreds of thousands of dollars or more.
You can either allow the buyer to control the transaction or you can control it. It’s not in the seller’s best interest to allow the buyer to control the process.
Fact: to optimize the sale of a business or professional practice starts 5 years before the intended sale.
Fact: The only two times someone sells a business is when they want to and when they must. Since none of us can predict the future the last place you want to be is in the must sell position without the 5 years of controlled preparation to support the sale. Of course, you still may get ten or twenty cents on the dollar. If that’s ok with you or your clients, stop reading now.
Since tomorrow is promised to no one, when should you begin preparing your business for sale? Either 5 years ago or the day you started the business are the correct answers.
The neat thing about preparing a business for sale is the same things you must do also enhance profits, reduce burden of management and make life a whole lot more fun.
A CPA should understand basic business valuation and be able to approximate the “Fair Market Value” of their
Having sold over 50 businesses I learned that proper preparation makes a huge difference in the business sale process and the results. So how do you prepare?
“Fair Market Value” (FMV) is a supportable number based upon the proper application of industry accepted business valuation techniques and processes.
Basically, there are two components to FMV.
1. The replacement cost in place of the tangible and intangible assets of the business.
2. Plus the value of commercial goodwill as defined and calculated by IRS Revenue Ruling 59 - 60.
It’s not rocket science. Every business has Key Performance Indicators (KPIs) which, if measured and tracked on an annual basis can be used to estimate fair market value. By tracking those KPIs you will identify profit leaks and operational inefficiencies which, if address with increase profit.
Once you have calculated a supportable “Fair Market Value” you need to determine if that value will allow you, the seller to achieve your objectives. If not, you have work to do.
If it does support your plans you will enter the selling process itself. Again, you can either make it happen for you or let it happen to you. Selling a business is a complex activity with 17 steps, each of which, if improperly managed cost serious $$, lost sales, anxiety and frustration.
If you want to learn more and see the 17 steps, request my white paper entitled “How to Sell Your Business (or Practice) For Top Dollar, in the shortest period, with the least interruption to your life. Email firstname.lastname@example.org or call me at 631-513-3309