Most business owners don’t understand that it is never too early to start planning for when you will exit your business and sell it. No matter what that sale looks like, you will need to be prepared, and for California wholesale distribution business owners, this is no different. 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 not sure what it is actually worth, or they will overestimate the value because they are too close to it to see any flaws, and it is their “baby.” The best way to get started is with a data-based, objective evaluation.
We offer a tool on our website that will introduce you to the business valuation process for free and will give you a general idea of what your business is worth. When you get to the point where you need a certified business valuation or if the tool is just too complicated for you or you don’t have time to do the work on your own, we provide business valuations as well. These are the type 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’ health and growth. A business valuation is the foundation of any good exit strategy.
The Importance of Location and Wholesale Distribution
While one of the keys to any business is the location, it is especially important for wholesale distribution businesses. One reason is that typically you need a significant amount of space, and any changes to the leasing costs of that property can dramatically affect your bottom line.
This is a good reason to negotiate your lease before you even start the sales process, and to make sure that your landlord would be willing to work with a new buyer, especially on cost, and that they will not be raising the cost of the lease significantly when it is transferred. More than one deal has been derailed by an uncooperative landlord or a poor lease.
If you own your property, you have choices as well. You can either sell the property as part of the deal or keep it and lease it to the new owners. This is an opportunity for you to collect some residual income, but you must also be prepared for 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 that selling a business is so tricky is that it is not like selling a home. You don’t want to just hang a sign out front and advertise everywhere. The news that you may be selling your business can be a big advantage for your competition, might disrupt your vendors as they may be nervous about getting paid, and nervousness about a new owner can also send customers looking for 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.
But you also need someone who will keep the fact that you might even be thinking about selling your business confidential until the deal is final, and 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 get nervous, as mentioned, but key employees can also be motivated to look elsewhere for work, 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 is so important.
Integrity and confidentially 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 getting 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 keep your transaction confidential 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.
Go to the next article: Part of tips to sell your wholesale distribution business in California series ->
