How to Stage Your Company for Sale

June 28, 2016 Scott Simpson

How to Stage Your Company for Sale

Staging your company for sale and obtaining maximum value takes time and discipline because the process involves making real changes to your financial practices. However you approach the staging process, two key goals are clear: Improve your balance sheet and clean up A/R. An acquirer of your business will look at all of your operations, but they will zero in on “trailing 12 months earnings” (historical earnings reaching back one year), because this is a solid indicator of the business’ health. Many acquirers will look deeper, requesting performance data that looks back four+ years to determine your year-on-year growth. That reveals the resilience of your business in good times and bad, indicating how you’re positioned to weather a range of economic conditions.

What kind of performance and growth is most attractive? If a company has grown its earnings by $1 million over a four-year period, that’s especially notable, because consistent compounded annual growth rates (CARG) are very impressive to an acquirer. But it would be even more impressive if you survived the Great Recession, held your market share position, and emerged well-positioned for the recovery. (That would require showing your financials going back seven+ years.) That demonstrates resilience, discipline, and focus, to say nothing of how it speaks to the quality of your customers and how you have structured your company to absorb anything the economy can dish out.

To illustrate how valuations change, let's look at three companies that have varying performance and see which would be the most attractive to an acquirer.

Interested in reading the full article?  Check out: How to Get Top Dollar When Selling Your Business

About the Author

Scott Simpson

Scott is president and CEO of BlueTarp. He has spent the majority of his twenty year career in financial services helping businesses grow more rapidly through the effective use of credit.

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