Most business owners in California don’t understand that it is never too early to start planning for when they will exit their business. Additionally, they should plan for when they will sell it.
Regardless of what the sale looks like, you will need to be prepared. For California wholesale distribution business owners, this is no exception. In fact, some advisors will tell you that having an exit plan in place is a good idea from the time you purchase your business.
So what does an exit plan look like?
Start with a Business Valuation
The very first thing you will need, no matter when you plan to sell your California wholesale distribution business, is a business valuation. It all starts with knowing what your business is worth.
Most business owners will either underestimate their business value because they are unsure of its actual worth. Alternatively, they will overestimate it because they are too close to it to see any flaws. After all, it is their “baby.” The best way to get started is with a data-based, objective evaluation.
We offer a free, straightforward guide on our website that introduces you to the business valuation process. This guide provides a general idea of your business’s value.
When you reach the point where you need a certified business valuation, or if the tool is too complicated for you, we also provide business valuations. It is also helpful if you don’t have time to do the work on your own. These are the types of business valuations you can use if your buyer needs to get financing to buy your business.
Even if you are not planning to sell your business for a while, some businesses do them every single year as a way to measure their business’s health and growth.
A business valuation is the foundation of any good exit strategy.
The Importance of Location and Wholesale Distribution
While location is a key factor in any business, it is especially crucial for wholesale distribution businesses. One reason is that typically, you need a significant amount of space. Additionally, any changes to the leasing costs of that property can have a dramatic impact on your bottom line.
This is a good reason to negotiate your lease before you even start the sales process. You should ensure that your landlord is willing to work with a new buyer, especially on the cost. Ensure they will not significantly raise the lease cost when it is transferred. An uncooperative landlord or a poor lease has derailed more than one deal.
If you own your property, you have choices as well. You can either sell the property as part of the deal or keep it. In this case, you can lease it to the new owners. This is an opportunity for you to generate some residual income. However, you must also be prepared to take on those responsibilities. If you are headed for retirement, this may not be the best choice for you.
Either way, your location and how it will be managed when you are no longer part of the business is a key to developing the right exit strategy.
Integrity and Confidentiality when selling a Wholesale Distribution Business
One of the reasons selling a business is so challenging is that it differs significantly from selling a home. You don’t want just to hang a sign out front and advertise everywhere.
The news that you may be selling your business can be a significant advantage for your competition. It can potentially disrupt your vendors, as they may be concerned about receiving payment on time. Additionally, the uncertainty of a new owner can also prompt customers to seek alternative options.
That is why there are two vital aspects to your exit strategy and any team you hire to help you with that or with the sale of your business.
The first is integrity. You want someone who will be honest with you in every aspect of any transaction or even evaluation. You don’t want them to elevate the worth or devalue your business and find out later in a transaction that you have been misled.
However, you also need someone who will keep the fact that you might be considering selling your business confidential until the deal is finalized. Additionally, ensure you are ready to make a formal announcement. This secrecy often also relates to your family. The wrong word to the wrong person at the wrong time can quickly derail a deal.
Vendors and customers can become nervous, as mentioned, but key employees can also be motivated to seek work elsewhere, leaving you in a potentially dire situation. Your competition can use that fact to discredit your business and steal customers away. This is why non-disclosure agreements and working with honest team members are so important.
Integrity and confidentiality are cornerstones of the exit plan for any California wholesale distribution business.
The Advantage of a Certified Business Broker
A certified business broker will help you with all of the steps above. They can help you get your finances in order and get an accurate business valuation. When you’re ready to sell your California wholesale distribution business, a certified business broker can help you find the right buyer at the right time.
At Rogerson Business Services, we pride ourselves on being honest and helping you maintain the confidentiality of your transaction until you’re ready to announce it on your own. Ready to get the process started? Contact us today! We’d love to be your business broker.
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