Thinking of selling the business? Why having an ERP helps.

Many business owners get to a point where they look at selling the business as an option.  Can be due to any number of reasons such as ready for retirement, or have become bored and want to try out a new venture.  Whatever the reason, it’s always a good option, but you have to know your numbers.  Too many business owners over-value their businesses.  You’ve put a ton of blood, sweat and tears in over the years, it’s time to get what it’s worth right?  Problem is, you have to prove it.

The Turn-key Cash Cow

This is what every business owners wants and what any investor or prospective owner would love to have.  Sure it might cost more, but it cash flows, and that should always be a top priority.  As business brokers, attorney’s, CPA’s, will all do an evaluation on the business, an evaluation should always be performed into the operations of the business.  When Operations and service delivery have been honed over the years, and are now as efficient as they can possibly be, it’s easier to see the value.  Every process can be explained as to why it exists.  Who wouldn’t want a business that cash flows, the team is extremely proficient, and is an overall well-oiled machine.  Good luck finding one of these gems however.

Most Case Scenarios

Many opportunities for sale could be considered a work in process, even if the business is established and decades old.  Businesses are ever improving with the times anyways, what’s a little more work right?  The new owners will have to figure out every detail and what’s been left out of disclosure and what changes will need to be made.  If they’re lucky, they’ll figure this out before losing money. There might be a transition period where you’ll stay on as an employee and fill in all the details where necessary and to give peace of mind.  What if you don’t want to stick around or are unable to?  Take less money?

The Long Game

What if there was a way to prove performance and process in all areas of the business.  Of course financial statements and due diligence is needed, and you’ll probably get devalued a bit due to coming in high to begin with.  But does that always have to be the case?  Most established businesses utilize software to run all areas of the business.  This is typically referred to as an ERP or moreso just a centralized business platform.  These are considered an investment (tax deductible no less), and utilized most of the time when a business has achieved growth and lost the ability to scale effectively.  Once implemented, it’s invaluable in terms of streamlining the business and providing instant data.  This data can now be utilized to continually improve the business now that you have numbers, which turn to metrics, which turn to key performance indicators.  ERP’s can give a prospective buyer all the data without question, makes due diligence mush easier and faster, and shows much more than just financial statements.

Planning Ahead

Business software platforms take time to implement and more time to iron out the tweaks of how you really want it to work after realizing what they’re capable of.  If you have 20 employees or more and are considering selling the business in the future (3-5 years), it’s a good time to see how an ERP can aide in the sale.  As mentioned earlier, it’s a tax deduction, and it’s only going to INCREASE your business’ value so it’s definitely a conversation to have.  If you can hand over a streamlined product that can easily continue producing what you’ve built over the years, everyone gets a great deal and if you’re lucky, they’ll pay a premium price for it.