PREPARING TO SELL YOUR BUSINESS It's sad to say but many services that come to me wanting to sell are in dire straits. They haven't kept up with the times and have old, outdated equipment, pricing that is below industry standards and are up to their eyeballs in debt. One thought you should always keep in the forefront of your mind is; when I do something to enhance my service, how is that going to affect the outcome of an eventual sale? Here are a few suggestions to keep in mind when getting your business ready to sell: 1. Equipment: If you were six months away from putting your service on the market than I would not recommend purchasing new equipment or upgrading your software. You will not recoup your investment in that short period of time. The buyer may also prefer a particular brand of equipment or may buy only your accounts. You would then have to sell your equipment on the used market, which usually brings only pennies on the dollar. If you are two to three years from selling and have old equipment, then by all means buy newer equipment. This enables you to keep up with technology and your competition by offering the same or more enhanced services. 2. Rate Increase: Annual rate increases are recommended. One of the most important formulas I use in evaluating a business is determining profitability, which comes down to your rate structure. I recently sold a medical service for over 14 times monthly billing and the reason it sold for that multiple was the way the services were priced. It was very profitable averaging $365 per client. The service had only 140 accounts but billed over $50K per month producing a net profit margin of over 38%. Do not increase your rates just before selling your business to boost your monthly billing. A potential buyer will want to see a reasonable conversion history for the rate increase. I would also recommend going to a 28-day billing structure. This will give you an additional one months billing per year, which should increase cash flow and your annual revenue. 3. Automate: One way to cut down on your biggest expense, which is labor, is to automate some of the functions required in the message taking/delivering process. By delivering the messages via e-mail, fax, voice mail, pager or cell phone, it will free up the time it takes the operator to hand deliver the messages in person. Some services offer an automated attendant feature to the caller giving them a choice of where the call should be directed with instructions that if this is an emergency, press 0 for an operator. 4. Cut the Fat: Get your business lean and mean. Cut out all of the frivolous expenses that you can do without and cut the dead wood clients. If you have clients that are non-payers or who do not produce a profit for your company, get rid of them. 5. Financial Record Keeping: Buyers are interested in businesses with a good profit margin of at least 20% or better, advanced equipment with updated software, management in place and a history of growth. One of the first items buyers ask for after reviewing your listing information is a current financial statement along with at least one previous years statement. This shows the prospective buyer how your business has grown financially in the past and its trend for growing into the future. 6. Clean your Financial History: Make sure that you have clear titles to your equipment, client base, etc., and that all your federal and state taxes are paid as well as being current on your payroll tax deposits. Buyers will do lien searches on you and your business, so if you have any skeletons in your closets - clean them up before placing your business on the market. Of course location, cleanliness of the operation, a reliable, well trained staff, etc. all have something to do with how salable your telephone answering service is, but the above points are key in the process of getting your business ready to sell. Top of page! Tas Marketing 233 Whitepine Creek Road • Trout Creek, MT 59874 Phone: 800 369-6126 • Fax: (406) 827-4554