Valuing and Selling Your Business: A Quick Guide to Cashing In (2014)

Introduction

A quick guide to cashing in! It would be awesome if selling your business and living happily ever after was quick and easy. It is not. Do not let the subtitle of the book fool you. The subtitle is in reference to the type of book this is rather than how easy it is to value and sell your business.

This book is written to the business owner that wants a quick read about the valuation and selling process in an easy-to-read format. My goal is for you to be able to know how your business is valued, be aware of ways to grow that value, and understand the selling process in less than four hours.

My ideas are intended to be understandable, straightforward, and direct. This book is not written for the professionals who serve the business owner but it is written directly to you—the business owner.

If you want to maximize your personal wealth it is important that you understand the valuation and selling process.

There are two disturbing trends that I see with many of my clients. The first is a major disconnect between the actual business value and the owner’s perception of that value. The second trend I see is that, even though in most situations a business owner’s largest financial asset is his or her business, he or she does not view it as an actual asset or investment. My clients when they come to me have been spending considerable time and money with their investment advisors growing their stock and bond portfolios, while putting no effort into knowing and growing the value of their largest assets—their businesses.

Once I noticed these trends, I started to recognize the major consequences that the business owners were having in not treating their businesses as investments. I was convinced that if business owners simply changed their mindset and started to treat their businesses as investments, they would have a greater sense of purpose and become wealthier. This discovery started my journey of preaching to all business owners that they need to treat their businesses as investments. Treating your business as an investment includes knowing its true value, having a plan to grow that value, and understanding how to realize the value that is in your business through a sale. If you can walk away from this book fully understanding the valuation process, knowing how to increase the value of your business, and understanding the selling process, then reading this book was well worth your time.

I cannot guarantee that reading this book will double or triple the value of your business in five years. The business world is complex, and you obviously don’t have total control of your destiny. You can take all the advice in this book and still not have things turn out the way you want. However, when you gain knowledge and take action, your chance of being successful increases.

I derived and adapted this book from a self-standing portion of my previous book, Know and Grow the Value of Your Business: An Owner’s Guide to Retiring Rich. In Valuing and Selling Your Business: A Quick Guide to Cashing In, I focus on selling one’s business as an exit strategy—to the exclusion of the various other exit strategies covered in my longer work, such as gifting to the next generation, retaining the business, and liquidation. In addition, my previous book includes more in-depth discussion about treating your business as an investment, more decision-making tools, and more examples. If you are unsure of what your exit strategy should be and what your full range of options is, please read Know and Grow the Value of Your Business.

The appendices in the present book detail what is required in a valuation repor and show you samples of the documentation that buyers will request from you when you sell your business. Although this book was not written to make you a valuation expert, you will find it instructive to see what is included in a valuation report. This is why I’ve included an excerpt of the AI CPA business valuation standards. In case you need to have a valuation prepared for a third party such as the IR S, the AI CPA excerpt in the final appendix provides reporting guidelines for business valuations and a comprehensive glossary of terms.

The sample due diligence request in the appendix will also be of great benefit to you. It gives you a head’s-up of what your potential buyer will request and serves as a checklist to make sure you assemble all the proper documentation and items that you will need for a buyer.

Thank you for picking up this book. After reading it, you will look at your business differently, I hope—seeing it as your most important financial investment. Finally, my fervent wish is that it helps you to “cash in” on the many years of blood, sweat, and tears you have put into your business!