Wednesday, April 7, 2010

Starting a Business Right Will Make Exiting the Business Easier and More Profitable

In the rush to get everything organized and planned to start a new business, entrepreneurs tend to overlook one important consideration -- how will it all end? Some plan to work the business for the rest of their working life, some plan to leave it for the kids, some figure they will just close it when the time comes.

The best choice, in most cases, is to ultimately sell the venture. Whether selling to the public through an IPO or to another entrepreneur once the business is flush, selling is the best opportunity for significant financial gain at the end of the line.

Planning to sell a business requires that certain aspects of the venture be run in such a way as to pave the path to a profitable sale.

Accounting Controls

The business valuation will be based on the numbers on the books...if the books are a mess or inaccurate, the actual value of the business will be difficult to assess. Good accounting SOPs should be developed and followed from day one of the business.

Financial statements should be produced and analyzed on a regular basis -- they can help identify errors in the accounting system or financial problems in the business.

And DON'T SKIM...this may seem obvious, but using the business cash to line the owner's pocket is an extremely common mistake that will devalue the company AND cause all sorts of other problems. All distributions to the owners must be clearly and correctly documented.

Create Systems

Every critical procedure should be documented and every staff member should complete tasks in the same manner. Developing SOPs that are actually used does a couple of things -- it allows you to identify opportunities to improve efficiency and ensures that the business can continue to run smoothly, even in your absence.

Manuals, SOPs, checklists, and the like should be the standard training tool for all employees, and everyone should be held accountable for meeting expectations. Of course, rules and procedures can be overdone...just use your common sense to separate critical tasks from the no-brainers.

Maintain Contacts

Use a reliable software program for collecting, maintaining, and using customer and vendor contacts. A strong, up-to-date customer database is an invaluable asset that will boost the sale value of your business, not to mention it provides an easy route to reach and keep your regular customers.

Pay Attention to Details

Know when your leases expire, contracts change, business license fees are due. File taxes on time and correctly. Comply with all federal, state, and local laws...even the ones that seem ridiculous. If you have a commercial space, keep up appearances. Update paint and displays to keep the space looking and feeling new and fresh. Don't let any minor detail slip through the cracks, those are often the ones that kill a sales deal.

Train Your Replacement

If you take the time to train solid managers who can run the business without you, that not only frees your time but adds value to the business overall. That way, the pool of interested potential buyers can include those who don't want to run the day-to-day.

Beginning with the end in mind can increase the end-value of your business, and likely increase your profits in the meantime!

By : K._MacKillop

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