If you work hard for 20 years, will you be able to sell your business for a good number? What determines the sale price? Or will you be able to sell it at all?
Recently, I was talking with a CPA I know. He was advising a client of his who was nearing retirement. This client had been running his business for over 2 decades and was now ready to sell his company. The CPA had introduced him to a specialist in selling businesses of this size. The three of them sat down and talked about his business and what it could sell for.
As the discussion progressed, it became clear that the company was highly dependent on the owner for its day to day operations. While the business was providing the owner with a very nice living, it was not going to provide another owner with the same cash flow for a long time, if ever.
So what were his options? The CPA and the broker both told the owner that he needed to build a management team to be able to run the business on a day-to-day basis without him.
If he did build this management team, the owner wanted to know how much value that would add to the business. The experience of the two advisors was that the company could easily be worth twice as much with a management team in place, and possibly up to 5 times as much.
What would you tell this business owner to do? Do you have the management team in place to sell your company?
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