NINE THINGS TO DO IN 1989
TO SELL YOUR PRINTING COMPANY IN 1990
By Stephen J. Kerr

If you have been thinking about selling your printing company next year, here are nine things that you should do this year to make your company more attractive to prospective buyers.

Few printers make strategic moves to improve their financial position and attraction prior to listing their business for sale. Only after having made the final decision to sell the company do they begin to scrape together the needed financial documents and clean up their printing plant to entertain buyers. The purpose of this article is to give the seller an opportunity to fully prepare his or her company for the market, to obtain the highest possible selling price and to sell the company in the least time.

1. OPTIMIZE PROFITS

While your company's past history of profits and prudent management will be taken into consideration by most buyers, your last year's net operating income is by far the most important factor when determining price. The company's net income after adjustments for depreciation and owner's salary will be multiplied by a factor of two to five to arrive at the price range you can expect from the buyer. So, a $10,000 increase in your net income can mean up to a $50,000 increase in selling price. That is why it is extremely important to sell your company while its earnings potential is at its greatest.

Too many printers wait until their company has endured several bad sales years in a row before throwing in the towel and offering up their company for sale. Or, their accountants have been burying the profits back into the company for years to avoid paying higher taxes. But this is not the posture that you want to assume in the year just prior to selling the company.

2. MAXIMIZE NET WORTH

Net worth can be defined as (total assets minus total liabilities, and equals your owner's equity). By maximizing your company's net worth, (raising your asset base while lowering your liabilities) you make your company both more attractive and easier to leverage, if necessary, for the buyer.

Be conservative. Do not enter into any new debt financing agreements and try not to draw on your credit line at the bank. Increase your cash and accounts receivable balances, while you lower your accounts payable and notes. Loans payable to the owner or deferred salary to the owner will not be honored by the buyer and only lower your net worth - so get them off of the balance sheet.

3. POSTPONE MAJOR PURCHASES

If major purchases of now equipment will not help the company advance sales and income in the near term, you may be much better off leaving that money in the company's bank accounts with a strong recommendation to the new buyer to acquire these improvements as soon as possible. This is not a recommendation to postpone needed presses and equipment vital to the smooth and efficient workings of your company -- but you may wish to delay purchases of computers, trucks, scanners, large presses, and other major capital expenditures that will lower your net worth and raise your debt, while not returning real savings or net income to the company for several years.

4. KEEP BETTER RECORDS

You will save yourself (and your broker) a lot of time if you keep meticulous records in the last fiscal year before selling. The buyer will ask you for detailed accounting records going back three to five years-so you might as well start organizing these records now. Keep cash flow statements, accounts receivable and payables aging statements and all those other financial statements that you may have neglected doing. Get a top notch accounting firm in to help you get organized, if necessary.

If your company has both graphic design and printing operations, and you plan to only sell the printing side of the business, start dividing up the companies now, each with their own set of books.

Remember, the buyer has the right to examine your books to authenticate the income figures that you are presenting. Printing company buyers usually know the printing business very well. If they encounter inconsistent and confusing accounting practices, they will offer far less for the company to account for unknown contingencies that they cannot verify in the books.

5. HIRE OR PROMOTE THE BEST MANAGER TO FILL YOUR SHOES

In many cases, whether the new owners will be moving in to run the company themselves or they intend to bring in their own general manager-they will be looking for key department managers to stay on and help run the company. If you do not have a fully competent general manager on board, someone capable of stepping in and filling your role as president, you might consider going out and hiring such an individual at this time.

6. CLEAN UP UNCERTAINTIES AND DEAD WOOD

If you have any labor disputes, legal entanglements, regulatory violations or unprofitable contractual agreements, you will want to clear these up this year. Lawsuits, union contract disputes and long term unfavorable subcontractor agreements may render your company unmarketable. To receive the highest possible selling price you need to sell your company with a clean slate.

Likewise, if you have non-productive salesmen, relatives, managers or pressmen that you have been keeping on due to personal loyalty or because of a prior agreement - you may wish to end your arrangement at this time.

7. DRAW UP A BUSINESS PLAN

Would you want to buy a boat without a rudder? That's what it is like for a buyer acquiring your company without a business plan. A good business plan will forecast marketing and production activities well into the future; foresee changes in your niche of the printing industry and plan actions to meet these changes; project sales and production budgets for up to five years and layout the company's goals.

8. HURRY UP AND FINISH UP

If your company has been working on improving efficiency, output and job control through modernization and organization, complete this work before selling the company. Finish up projects that you have been postponing for years, due to time and priority considerations. Also, finish that brochure that you have never quite completed and put it in your salesmen's hands this year. Gear up your marketing and dust off promotions that you had lost interest in.

Buyers can sense activity and energy in a printing plant. And they are willing to pay more for a company that is going strong and moving ahead than one where the life seems to have gone out of it.

9. BRING ALL OF THE PARTNERS OR MAJOR STOCKHOLDERS IN LINE

You may not have total agreement within your organization on just how the company should be sold. If you do not own or control the bulk of the stock or percentage of partnership, you can either lobby your stockholders/partners over the wisdom of selling or you may choose to buy out minor stockholders or partners at this time.

Be aware of promises that your partners may have made to members of their family over jobs at the company. Members of your own family may have had an eye on working at or being asked to take over the shop when you retire. You may never have told them to expect this -- but they may feel that they have some sort of understanding with you that you do not share.