10-step plan to end A Mid-Market Distribution Business
"Those who do not plan, plan to fail" - An old proverb
You've worked hard for many years to build your distribution business. It is provided you income, satisfaction, prestige and purpose. Now the time has yet to make a final agreement on the business and quit your business while ensuring that you get what you deserve.
A mid-market distribution business, the nature ofHave> company, is generally characterized by strong customer loyalty, good logistics and material management system, moderate features, and sometimes a large quantity of stocks. This combination of assets creates a unique set of challenges when it is time to sell.
Here is a 10-step plan is to maximize your return on the sale of your mid-market distribution business.
1. Note that for a distribution company with a valuation of $ 3Million to 100 million U.S. dollars range, funds from the Small Business Administration is not feasible and there are very few individual buyers able to finance this kind of deal on personal loans. The most likely buyer is another private company, a corporation or a PEG (see "Private equity is the right one for your) business." These are busy professional buyers who have more experience. Hire a qualified M & A adviser or an investment banker for business transactions Experience to the table. Acquirer think in terms of EBITDA multiples for comparable companies when it comes to the assessment. A good M & A specialist will contribute to the EBITDA multiple ratchet set, and the strategic importance of the company for you get more for your business. M & A Advisor is also sharply aware of the compromises necessary to maximize your after-tax proceeds.
2. Check your corporate structure is the most suitable product for a> Companies sell. Are you a C-Corp? S-Corp? LLC? Do you have multiple organizations with multiple purposes? Regardless of the type of corporation (s) you did when you copied a large amount of sales of assets, depreciation recapture can be a big problem for you. For the distribution companies with a significant amount of assets, with a C-Corporation can make a significant tax disadvantage, as most buyers prefer a sale of assets to sell a stock. In a C Corp sale, you taxed twice - once withthe company level and once at the individual level! For most distribution company owners, it is worth getting your M&A advisor to fight for a stock sale.
3. Make sure your books are in order and your financial statements are compiled, reviewed or audited as may be appropriate for your business. Your current bookkeeping practices and tax structure may be designed to keep your taxes low on an operating basis but they may not be right for exiting your business (see "What Every Busines Owner Needs To Know About Taxes & Valuation "). If your CPA has a lot of companies still do not have experience, consider working with a company that has experience. In the mid-market transactions, good tax advice can be worth hundreds of thousands if not millions of dollars.
4. Retain the right to advocate for the business. An attorney with transactional experience, as opposed to litigation experience is more likely to help put together such a successful deal. Many deals collapse due toLawyers who are not familiar with the transaction negotiations.
5. Do you understand how to run your competition and how you measure. How good are your margins? How about inventory turnover? Their equipment is outdated? Do you have a lot of dead inventory on the books? Some of the value in the business comes from the perception of the buyer, how do you evaluate your peer group. Excellent company received excellent reviews and mediocre companies with mediocre ratings. A competent M & A advisorPackage can also help your company get the best deal out of it.
6. Reduce risk by diversifying the customer and supplier base. What percentage of your business is tied to a client? How dependent are you on one supplier? What can you do to ensure that customers and suppliers, will remain with the company after the sale of business? Are your contracts are written so that they can remain with the business regardless of the changes?
7.Understand and have a documented plan for your growth. How do you want to grow? Wider product lines? More services? Increasing the geographical coverage? What part of your business is online? How good is your website? Doing business outside the immediate geographical area? What makes you different in a non-local markets? A good growth plan makes sales projections more credible.
8. Take steps to ensure that your distribution business transitions easily to the transferee.What percentage of your company is under contract? Are they long term? How much is your company again and again? Do you have maintenance contracts? Do one of the contracts provide meaningful exclusivity? Do you have a reliable sales team, or start the client and end with you?
9. Do you have any known latent liabilities? Claims? Workers comp issues? ESOP questions? Do you have adequate insurance or suspended, that a shipmentor warehouse catching fire and taking you down with it? If possible address these and other similar issues before putting the business up for sale. If not, discuss these with your M&A advisor to make sure that they do not become a drag on valuation or deal killers. Addressing these issues is especially important if you are seeking a tax advantageous stock sale.
10. Be cognizant of the fact that business valuations are not written in stone and there is a huge Variability, what you get for your business (see "The Myth of Fair Business Valuation"). The more you want your company to receive, the more predictable, you make a lot of team work to be done and the longer it is likely to take needs. Plan early if you maximize your returns.
Good luck with your company the sale and let us know if we can help you.
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