Simple Solutions That Work! Issue 15

SELLING THE SHOP: A COLLECTION OF THOUGHTS FROM THOSE WHO HAVE BOUGHT AND SOLD THEIR BUSINESSES. O ne of the coolest examples of sustainability in American enterprise is the longevity of the family- owned business. In the foundry industry, as with so many other industries, the lifespan of the business frequently mirrors the preparedness of the family ownership. In the rare occasion, a foundry can pass from one family to another through a sale of the business. There are many methods of exiting a business. The worst for the economic community is an unplanned death in a business unprepared for sale. Less damaging but still generally unprofitable for the owner is a planned winding down and liquidation of assets. Working with legal and tax advisors, ownership of the business can be inherited, gifted, sold as shares to an individual or multiple family members. The business can also be sold to the employees through WILLIAM SHAMBLEY President New England Foundry Technologies ARTICLE TAKEAWAYS: • Getting your shop in order from accounting through marketing • Exiting on your terms the business as cleanly as possible for two, but preferably three years. A new owner with the potential for acquiring the business is going to use a bank, and banks like strong financial statements. To get the most value at the sale, you’ll want monthly or quarterly statements for the balance sheet, income, and cash flow. A good CPA can make sure these are accurate. Other data can help increase the amount a buyer is willing to pay. A list of customers, (anonymous customer names are fine) with corresponding revenue, shows the “Customer Concentration” of your business. Actual customer names might not be revealed until closing. One evaluation used during the due diligence process is the QOE, or Quality of Earnings report. The QOE reports digs deeper into the income statement, qualifying positive or negative income with information about the transaction history. This may include analyzing the last three years of revenue for the top ten customers. Buyers need to know if all the revenue come from one or two large accounts, or is it well distributed across several accounts. Are all the customers good for one or two transactions, or do they have long recurring revenue streams? Being able to show and explain a three-year revenue history will increase the value of your business to a buyer. While you’re at it, take a hard look at your accounts receivables, and your customer list overall. Consider retiring customers 40 Employee Stock Ownership Programs (ESOP). The most straight forward exit, and potentially the best long term for the health of the company is a well-planned sale of the entity. This article will focus on this last case, with notes from buyers and sellers. The contributors have been kept anonymous. Family-owned business, especially single owner-operator scale ventures, can be excellent wealth management solutions, with many tax saving benefits. As time passes, eventually the owner-operator wants to retire, or the family runs out of heirs apparent who want to keep working with the zeal required to run a successful business. Keeping an eye on the future, the owners should plan on running