Aug
2022

Podcast: 5 things you need to do before selling your business

by John Lawson August 29th, 2022 in Money Tips

To borrow a phrase from our last podcast guest Cecilia Mannella, an entrepreneur’s greatest strength can sometimes be a weakness too.

In this context, a business owner’s work ethic can often cloud the bigger picture.

We’ve seen it time and time again, but it’s an easy trap for entrepreneurs to get caught up working in the business instead of working on the business.

If you’re a business owner caught up working in the business, this podcast is a crucial reminder to focus on the long-term plan.

On the latest episode of the Wealth Wisdom Podcast, I’m joined by Bob Lawrence from VEER Business Advisors. Bob’s area of expertise is exit readiness and value enhancement for business owners, and he walks us through his “VEER Assessment” of 5 things you need to do before selling your business.

You can listen to the podcast through these popular avenues.

You can also watch the video podcast here.

Here are some highlights from the latest episode.

How long-term objectives impact a sale

Step #1 in Bob’s roadmap is figuring out your objectives prior to sale. This includes not just business objectives, but personal and family objectives as well.

He brings up one example where an owner who was selling their business was offered an opportunity to profit from growth in the business in the coming years.

While Bob thought it was a good offer for his client, he soon realized that the objectives of his client trumped any potential profit-sharing opportunity.

“It left them financially, emotionally and intellectually connected to the business for longer than they wanted.”

He elaborates on the point of changing objectives in this clip here.

Solve for X

Step #2 elaborates on step one.

Once you have a good idea of your long-term objectives, you need to start crunching numbers to see if your retirement cash flow lines up with your goals.

Many of you know very well, this is where Josh and I step in.

When the value of your business prior to sale isn’t enough to fund your retirement, there are two options for you, which Bob outlines here.

Make yourself redundant

Usually, no one wants to be described as redundant.

However if you’re a business owner, that’s what you should strive for.

Bob’s third step in a successful selling process was focusing on valuation and figuring out which value factors are relevant to your buyer.

Do you think a potential buyer wants to purchase a business that’s heavily reliant on its owner?

Know your buyer

Who is the most likely buyer for your business? Is it employees, a third party, or a competitor?

That’s the position that one of Bob’s recent clients – owners of a pet food chain on Vancouver Island – found themselves in recently.

Beware the tax man

This is where I get to re-insert one of my all-time favourite quotes into this article.

“It’s not what you make, it’s what you keep.”

Bob talks about factors that can eat into income from your business sale in the clip below.

Bonus Step: The Action Plan

In true, Canadian, good-guy fashion, Bob includes a bonus sixth step in the selling preparation process that ties the first five points together: the action plan.

Action plans will obviously differ greatly based on the business and the owner. In the below clip, Bob talks about a common action plan for business owners if your potential buyer is a Private Equity company.