Time to develop a plan to get your operation ready to sell

Q: I’m starting to think about retiring from my small business, but I have no one to take over. I don’t want to just walk away, but I think I have some work to do if I want to get someone to buy it, and for a decent price. Any advice?

A: BizBuySell.com, the internet’s largest and most heavily trafficked business-for-sale marketplace, just released statistics showing that the median asking price for all business types for sale in Houston in 2017 was $205,000. The median selling price was $180,000, on average 92 percent of the asking price.

The median revenue of these firms was $356,400 and the median cash flow was $96,667, meaning on average buyers paid 61 percent of the median revenue and a little more than two times the cash flow. All that is to point out that as you’re getting ready to sell your business, it’s critical to be able to show cash flow that is positive and revenue that is significant enough to attract a buyer who is willing to pay what you consider to be a good price for your business.

If you’re not there yet, you might want to develop a business plan outlining how you’ll get there before your target retirement date. Take a look at your current market, as well as your financial and operational strategies to see what might need to be reworked or improved to make your business more attractive to a buyer.

Your customers are critical. Do you have enough, and are they good ones? Do they give you repeat business? Do they pay their bills on time? Supplier relationships need to be secure as well. Do you have efficient purchasing processes and keep your accounts payable current?

You say you have no one to take over for you when you retire, but are there other key personnel to provide the expertise and skills needed to keep the business going? You may need to provide some training to fill the gap you’ll leave.

And if you want to get top dollar, make sure that facilities, machinery and equipment are in tip-top shape, and upgrade any outdated technology.

The BizBuySell.com website has a lot of free and for-fee resources to help you prepare, including tools for valuing your business.

You may also attend the Texas Association of Business Brokers State Convention & Tradeshow being held Wednesday through Friday at the Wyndham West Houston Energy Corridor. The event features networking opportunities as well as business workshops covering topics such as business tune-ups, buy/sell tax strategies and exit plans.

You’ll also be able to meet with financial advisers, accountants, CPAs, business attorneys, appraisers and other experts. If you buy your ticket online at tabbconvention.com, you can book two 1-on-1 consultations. The guest ticket price of $130 should be well worth the tips you’ll get and the connections you’ll make.

Jacqueline Taylor is deputy director of the Texas Gulf Coast Small Business Development Center Network, a partnership of the U.S. Small Business Administration and the University of Houston C.T. Bauer College of Business. Information is intended to provide general guidance only. jtaylor@uh.edu