A few years ago, a business owner named Don was ready to sell his company. Instead of taking him as a client, we asked him to take the "Sell Test." Don failed. He was shocked. He wanted to know what it meant.

Asking a business owner to take the "Sell Test" means making sure the proposed transaction will ultimately accomplish the business owner's goals.

Let's look at the "Sell Test" one question at a time.

Most businesses are valued on a multiple of earnings, so your profits are one key factor in driving up the value of your company, but the other number in the equation is the multiple of your earnings used to arrive at a price. This multiple is based on the risk a buyer sees in your business.  The riskier it looks, the lower the multiple and the lower the value.  The more stable and predictable your business is, the higher the multiple a buyer will be willing to pay.

Below is a list of 8 things you can do to increase the value of your business in 2012:

As M&A advisors we take a lot for granted.  When we talk with business owners about their options we often throw around buzzwords like "Discounted Cash Flow," "Net Present Value," and "EBITDA" and assume that by using these short cuts we are simplifying things.

Early in my career I was talking to a potential client and I learned a valuable lesson.  These phrases and concepts are not widely used by many business owners and rather than helping to explain our approach they actually ended up adding to the confusion.

Timing is a key element of success.  As a result, knowing when to act and when not to act is a key component in all important decisions. Likewise, knowing when to keep your business and when to sell it can make a significant difference in your success. Take the following test and review your answers with a professional at MidCap Advisors to ensure that your timing is perfect!

Over the next 15 years, the U.S. economy will experience an unprecedented increase in the number of businesses for sale as baby boomer entrepreneurs begin to retire. The result? A glut of businesses for sale and downward price pressure for privately owned companies.

Three separate studies by PriceWaterhouseCoopers, MassMutual and Marquette University show that one out of two businesses will change hands between 2005 and 2020 as baby boomers get older and approach retirement age. Tragically, the same PriceWaterhouseCoopers study revealed

If you are a business owner, no doubt you have been approached from time to time by a would-be buyer who expresses an interest in buying your company. The way you handle those early contacts can make a huge difference in the likelihood of a successful and lucrative sale. The following is an overview of how to handle those important early discussions to make sure you capture valuable information about the marketplace, who the active buyers are, and what drives the value of your company. All of this information will be invaluable when you eventually do decide it's time to sell.

Gardeners prune constantly to promote healthy plant growth. Like a gardener, a CEO needs to continuously prune his business divisions and product lines to ensure the healthy growth of his company. A great deal of energy is often focused on acquisitions, but little attention is often spent on the importance of divesting or pruning a company's smaller non-strategic business units.

A recent article entitled "How the Best Divest" in The Harvard Business Review makes the point that there are appropriate times to prune plants and the same applies to businesses. Divestitures should be included as part of a forward thinking strategic plan, not as a reaction to hard times. According to The Harvard Business Review, "corporations that take a disciplined approach to divestitures not only sharpen their strategic focus on their core but also create twice as much value for shareholders."

1. Opportunity to Improve. The highly fragmented nature of the healthcare services industry often creates an opportunity for private equity investors to "tweak" existing business models to improve efficiencies and returns. This may mean consolidating back office operations to reduce costs, having centralized marketing to improve branding, investing in technology to improve efficiencies and clinical outcomes, and investing in training to attract and retain good employees.

John Parnell, a Managing Director with MidCap Advisors and head of MidCap's Education Group, was a featured speaker at the Region IV PCCS Conference in Atlanta on February 22, 2011.    John spoke to owners of private career colleges & schools about current trends in mergers and acquisitions for companies in the educational sector.  

John will also be speaking at the PCCS Conferences in Philadelphia on April 19, 2011 and at the Indian Lakes Resort outside of Chicago on May 24, 2011.

Exit planning is one of those unique win-win propositions. In the critically acclaimed book, "The $10 Trillion Opportunity: Designing Successful Exit Plans for Middle Market Business Owners", I examine the significant benefits a well-designed exit plan can deliver for a business owner.

The Benefits to Business Owners

A well-designed and implemented exit plan is a powerful and valuable business and personal planning tool. It is a process that asks and answers all of the personal, business, financial, legal and tax questions involved in selling a privately held business.  It enables business owners to: