Blog written by Robert Champoux, RC Advisory Services
If you are considering the sale of your company it will often require that you change the mindset about your company. Frequently company ownership has been a a many year involvement with employees that have grown to become like family. As you approach the sale of your company however you will need to look much more dispassionately at the upcoming transaction; less like selling your “baby” and more like selling the stock in an investment. This can be very difficult however it is a necessary part of a successful transaction.
Another part of changing your mindset is to start critically looking at your company as if you were a buyer. Are you, the seller, the only person making decisions? Are you an owner or is this more of a job? Do you have a subordinate staff trained to take over when you depart? Can you go on an extended vacation without calling in on a daily basis and constantly communicating by email? Do you have a business plan that is focused on growth, growing gross profits and EBITDA1 and is your staff executing it? If not a mindset change is indicated
Another part of the required mindset is the need for patience and flexibility. In order to obtain the best value for your company you will need at least one and preferably two years of optimal EBITDA performance. Accordingly It may take several years to get a company ready for sale and then 9-12 months to sell a company after the final decision has been made to sell it.
Note 1: EBITDA (Earnings Before Interest, Taxes Depreciation, Amortization, one time charges and extraordinary adjustments); reflects that cash flow that a buyer would realize if he/she didn’t have to borrow any money to buy the company and didn’t have to pay any income taxes. Adjustments would include expenses incurred by the seller that would not be incurred by the buyer. A one-time charge might be a piece of equipment purchased and expensed off under Section 179 of the IRS code (ideally should have been capitalized).
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