Creating Your Formula For Selling a Small Business pt. 2

Creating Your Formula For Selling a Small Business

Creating Your Formula For Selling a Small Business

FOCUSING ON THE NUMBERS

WHAT ARE THE CRITICAL NUMBERS (PART 2 OF 3)

In my last post, I set the stage for why the use of numbers and metrics is important if we are going to have a formula for selling a small business that is successful.  In this post we will go into more specifics; namely the types of numbers and metrics and why they are important.  Then in Part 3 we will discuss how you use them to put yourself in a position for a successful sale.

Numbers.  Why are they important?  They’re important because they present empirical information on what has taken place.  They take you out of the world of opinion.  And they are the basis of metrics and accountability management which in turn are the keys to on-going performance improvement.  If you want to give comfort to a buyer and make their fears lessen, give them data, not opinion.  Give them tools to measure how you are doing, not opinions that everything is going great.

There are almost an infinite number of things that could be measured in a business.  As in most things, there are a few that are far more important than the others.   Just keep in mind that your business has certain major functions it has to do well to be effective. These are what you want to be measuring. However, there are certain overall categories that buyers are going to be looking for.  These are:

• Financial Information – This is usually Income Statements, Balance Sheets, and Cash Flow Statements and the ability to understand what is in these reports
• Sales Information  - This might be things such as sales activity (pipeline) information and sales history information (what’s been sold to whom and with what profitability
• Operations Information  -This is the information that shows exactly how you do what you do and can include information on production, productivity, quality, labor, etc.

If you are serious in wanting to have a successful business sale, my advice is get a professional to help you.  There are all kinds of advisers and consultants who specialize in helping businesses develop business information and help businesses to interpret that data.  If you’re serious about selling, if you are going to use numbers and metrics, then do it well and do it right the first time.  That means getting an expert.