Get Started to Get Out You may have only needed a truck and some tools to start your business, but leaving it is not so simple (see Checklist, below). At least three other people will need to be involved: a business broker or succession strategy consultant to help you value the business and create a plan; a lawyer to make sure everything is set up correctly; and an accountant to ensure your plan offers you the best tax strategy. The way you exit has a lot to do with the way you entered and structured your business, and it requires a solid but flexible plan.
Checklist for Exiting With Cash Flow
- Operational systems and processes in place: financial, marketing, design, production, personnel, communications, sales
- Clean and healthy income statement and balance sheet for at least three years
- Current Accounts Receivable and Accounts Payable — no old items hanging around
- Good current ratio: current assets/current liabilities should be 1.5 or greater
- Credit line that has had a variable balance: that is, one that is used as a credit line for short-term cash needs, not one that has been maxed out for a significant period of time
- Clean workers’ compensation and liability audit
- An experience modification (a safety rating that reduces your workers’ compensation costs): less than 100 rating is attractive for new owners
- Accurate legal contract language in place in all jobs
- Three- to five-year trended financial statements showing growth or stability
- Consistently good gross profit margin (shows repeatability of processes)
- Specific human resources policy and procedures with routine employee reviews
- Job descriptions for all staff
- Operational budgets
- Inventory of all equipment, vehicles, small tools, software and hardware, furnishing and leasehold improvements
From Leslie Shiner, a senior industry advisor for Intuit Construction Business Solutions.