If you are relying on your business to fund a comfortable retirement and the current business value is less than what you need for this purpose, you may be in a situation where you can't afford to sell.
When you are considering selling your business, ask yourself these five questions:
- What is the current business value?
- What is the business value needed at sale?
- What is the period before you can afford to sell?
- What is your profit target to achieve the business value needed at sale?
- What are your growth strategies to achieve the profit target?
If you do not know the answer to any of these questions, you would benefit from completing our Business Value Gap Analysis.
This is a process we go through with you to assess your current circumstances and ascertain where you want to be at some point in the future.
A “Business Value Gap” is the price difference between the value of your business today and what you need it to be at the time of sale.
If you urgently need to sell now due to ill health, financial reasons etc. then the shortfall in what you desire for a comfortable future life can have a significant impact on your future plans and it may force you to reassess your future standard of living.
If you don’t need to sell now, but you want to, if the business value is not what you need it to be to give you the retirement you desire, then it may mean that you cannot afford to sell your business now.
If you are like many Baby Boomer business owners, you will now be considering your retirement, and this will likely require you to sell your business.
Too many business owners do not find out the value of their business until they decide to sell it and then they get the business valued or appraised in readiness for selling it. And invariably they are shocked and then disappointed in the value provided.
Before the decision is made to sell, you need to determine your business value gap.
This is the difference (the gap) between what your business is worth now and what you need it to sell for.
At the beginning of this article I identified 5 questions you need to answer or seek answers for.
The Business Value Gap Analysis is a simple process to determine your desired retirement income and what the value of the business needs to be to provide that. We assess what the value of your business is now, and how that value relates to what you want it to be when you sell.
If your business value gap analysis reveals a shortfall in business value; then we put in place a plan to achieve the business sale price needed and the business strategies that need to be implemented to improve the profits of the business before you sell.
Ideally you will need a minimum of three years to implement the plan, depending on the size of the ‘gap’.
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Disclaimer
This article is provided with the compliments of Alan Dinnie. It is genuinely intended to offer readers information to make better decisions and to give insight into various aspects of business in general, and more particularly related to the sale and purchase and management of businesses.
All material presented herein is intended for informational purposes only. Information is compiled from sources deemed reliable but may be subject to errors and omissions. No statement is made as to the accuracy of any description. Alan Dinnie makes no warranties or representations regarding the information and excludes any liability which may arise because of the use of this information. This information is the copyright of Alan Dinnie.
Nothing herein shall be construed as legal, accounting, or other professional advice outside the realm of real estate and business brokerage.
I trust you enjoy the article and that it provides you with useful information.
To your business success
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