Entrepreneurs purchase businesses for many different reasons. They want to continue operating a restaurant that has spanned four generations; others are looking to purchase an investment property (commercial or industrial) that already generates income; some are interested in identifying raw land to build a multi-family or mixed-use development. So we know why they buy, but why do entrepreneurs decide to sell?
According to Inc.com, small business owners sell their companies or properties for various reasons. For a number of them, retirement is on the horizon and it is the next rational step. Others are interested in a career change, maybe they are dealing with family issues or an unforeseen circumstance, and business conditions have changed.
Bo Mangam, a real estate agent with Landmark Commercial Realty, Inc., says when you initially purchase a business or property or build a business, your main objective is to develop and grow the business. “Obviously selling it is not on top of mind. However, at one point, creating a succession strategy should become a part of your business plan.” When the time comes and an owner is looking to leave the business, the exit plan should be in place. “One should also allow 1 to 3 years for a successful business exit to take place.”
Mangam also believes following these four steps while operating the business, will make selling your business less stressful, and ultimately, a more simple experience down the road.
Keep accurate and updated financial records to evaluate your business
A business that produces real and steady income is sought by buyers. Mangam believes that to support the value of a business, from day one, owners should maintain accurate financial records. This includes profit and loss statements, tax returns, information on business owners’ benefits and anything that creates adjusted net income.
Proper evaluation of a business
It is not an easy task, but correct business evaluation is extremely important if one wants to sell it in a reasonable amount of time. Many business brokers have their own business evaluation methodologies. It is not a science.
Maintain equipment and real estate
A prospective buyer does not want to purchase a business or property that looks neglected. Mangam’s advice is to maintain everything you want to sell – equipment and the property. “First impressions are so important.”
Focus on operating a good business
“Good business operations with a good product and good customer service make money. These businesses have returning customers.” Mangam added, “If you are operating a good business, one that people trust, it will certainly be easier to sell when that decision is made.”
If you are looking to sell a business, Landmark Commercial Realty, Inc. has your best interest in mind. Contact us when you are ready to discuss.