One of our members and CEO of Intrust IT, Tim Rettig, was recently invited to give a webinar on topics he is an expert in: the proper preparation of selling a business and employee stock ownership plans (ESOPs). The webinar was full of valuable information for anyone looking to sell their business or transition to an ESOP. Watch the recording here.
Preparing for a Business Sale
If you’ve sold a business or bought another business, you may already be aware of how rocky the process can be. There are a few things that can be done to help ensure smooth sailing:
Ensure your financial records are clean and transparent. There should be a separation of all personal and business expenses.
Document the processes and systems (or establish them if you haven’t) you and your team use. This gives any potential buyer a clear understanding of your operations.
To avoid discrepancies and to simplify the transition, standardize your customer agreements.
You’ll want to streamline integration and improve your efficiency prior to a sale. To do this, you should unify your technology stack.
You’ll want multiple revenue streams. Relying on one or two clients isn’t always a good look because it may appear risky to many buyers.
When you have these items aligned and you’re well-organized in terms of the documents you may need, you can ensure a smooth-as-possible sale and transition. Plus, having these items ready also makes you more attractive to buyers.
Everything You Need to Know About Employee Stock Ownership Plans
Beyond being an expert in all things IT and cybersecurity, Tim is an expert in ESOPs. In fact, his organization went through the ESOP process in 2019 and he’s helped many other organizations take this step. Rettig shared that the ESOP model has fostered employee loyalty and reduced turnover. Offering employee stock ownership plans as an option can enhance your employees’ commitment to your organization. It makes them more motivated and stable, which is extremely beneficial before, during and after an acquisition.
Tim also discussed how an employee stock ownership plan can make your organization more appealing to sellers as they’ll know the employees are well taken care of and that your organization is stable.
Fair Compensation for Owners
Beyond ensuring your sale is smooth or your transition to an ESOP is organized, ensuring you and other owners get fair compensation is vital. Tim emphasized that underpaying yourself or key personnel in order to inflate profitability often backfires during the sales process.
A potential buyer will adjust the financials to account for fair market salaries, which can alter the perceived value of your business. Paying yourself, owners and other essential employees reasonable compensation gives an accurate representation of your profitability and operational costs. Once again, this makes your business more credible and attractive to potential buyers.
About the Webinar
Margee Moore, CEO of BigOrange Marketing and EO Cincinnati member, hosts monthly LinkedIn Live sessions on topics ranging from creating your marketing plans to social media advice and much more. Last December, she invited Tim to co-host the webinar on ESOP plans and how to prepare a business for sale. Watch the webinar to learn even more about M&As, revenue diversification and much more.
One of the goals of our organization is to bring like-minded entrepreneurs together, and we are so glad Margee and Tim were able to share this knowledge with their audience.
If you are looking for a group of like-minded entrepreneurs to support your entrepreneurial journey, contact us to learn more about becoming a member.
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