If you feel uneducated and unconfident about your business’s valuation, join the club. You are a business owner, not a business transactions specialist.

While anecdotes can serve as legitimate inputs to establishing the value of your firm, let’s learn about how buyer’s approach value in today’s marketplace.

Lately though, you’ve been turning your attention to some bigger questions. The status quo isn’t working for you anymore and you’d like to shake things up. You keep posing a question to yourself, “Should I grow this thing? Or should I sell the company and move on?” You’re just not sure, but you know it requires some exploration. Putting your head in the sand will only hold off the inevitable for so long.

When it comes to these questions, you need a different skill set from your current internal capabilities. Navigating through these waters is much different from your day-to-day accounting and finance processes. It might be time to think about a Transactional CTO.

You may be like most business owners. Your business is your passion and hobby. Sure, you enjoy R&R. You like golf and travel, but you feel most alive at the helm of your business, not on a yacht in the islands.

But if you want to find your next act, you’re going to need to do some self examination to figure this out. If golf and travel do not sound like an enticing retirement, you will want to find something that is.

For the first time in months, you open up your desk and pull out your notebook with your priorities listed. Amidst a list with some items crossed off as done and others awaiting your time and effort, one stares you right in the face: “succession plan”.

Every time you consult your list you see that one and then pick something else to work on. Planning your exit is something that just never seems to reach the top of your priority list. It’s never the right time to deal with this one, so you’ve ignored it.

EBITDA is an acronym for Earnings Before Interest, (Income) Taxes, Depreciation, and Amortization. You won’t find it listed on standard company financial statements, but you can calculate it from them. EBITDA is a very rough calculation of the cash flow generated by your business operations.

When it comes to selling debt or equity in your business it’s important to note that EBITDA comes in many flavors and will be a critical metric in any discussion.

Most of your advisers are the original gang despite the changed scope, scale, and complexity of your personal and business needs. Whenever your controller and others have expressed concerns in the past, you have played the loyalty card and said, “These are the advisers who got me here.” While this is somewhat true, you know they may not be the right group to take you where you are headed.

Gone are the days when you knew everything going on in your company. Your free-flowing team meetings are getting increasingly chaotic. Everyone talks about how well everything is going in their department, relying on stories and anecdotes. Yet you know profit margins have been slipping for consecutive quarters. Something is wrong, but you cannot put your finger on it.

You’ve heard it said that “words matter”. As a business owner you might be surprised about how words can attract or repel potential buyers for your business. Let’s take a look at a few real world examples to get a sense of what we mean.

Excessive owner dependence plagues many companies and buyers are on the lookout for it. If you’re looking to sell and retire, and you’re still sitting at the intersection of everything, you’ll likely be unable to fool savvy buyers.

While resolving your owner dependence issue can be a challenging problem to solve, it may be the largest key to unlocking meaningful value in the sale of your business.

“The kids will take it over and they’ll deal with it.” After all, who would turn down the opportunity of a lifetime, to step into the enterprise that provided the charmed life you and your children have enjoyed? Why would they choose any other path, right?

While the answers to these questions may seem self-evident to you, your assumptions are worth exploring.

While purchase price is an important factor, and often the most important, it is not the only factor to consider. An offer is only just that, an offer. It is not a closed deal. To get to a closed deal, you should also consider offer terms and certainty to close, in addition to price.

Given that you as the seller plan to no longer own the business, you would probably like to leave as little money behind as possible. In a typical transaction it is not uncommon to see 10% or more of the purchase price held back in escrow or contingent payments for a year or even longer. This is an uncomfortable situation, especially when selling your business to a deep pocketed financial investor with access to the best legal counsel.

On the other hand, if a seller offers a R&W policy as part of the package to a buyer the premium needs to be paid, but the escrow goes away. This makes for a much cleaner transaction.

Rather than wander into this jarring culture shock unprepared, it is important to consider how you’d like your post-sale situation to be handled. In many cases your role will be fleshed out between you and the buyer. So let’s think about this from two specific (and potentially conflicting) points of view.

You’ve got your anxiety about the inevitable: your exit from your company. You’ve heard a few stories and you know that selling your company is just as competitive as making a buck in your industry.

In your day-to-day business, you know the market and you’ve played the game for decades. But in the market for the buying and selling of businesses, you know it’s an unfair fight. You know that someday soon you’re going to need to step into the ring.

When it comes to the sale of your business, the most prized assets are the ones that have the highest potential to generate recurring future cash flow for the new owners. So the key to a successful business sale is not historical or present cash flow, but transferable future cash flow.