Even for the most successful entrepreneurs, the often-complex process of selling a business can present a number of challenges.
There is the emotional hurdle of surrendering a venture that probably represents the fulfilment of one of your major life goals. Then there’s the financial imperative to secure a high enough price to fund your next venture or retirement.
When businesses fetch a lower price than anticipated, it's often for want of a solid exit strategy.
If an exit is on your agenda, here are some ways to maximise the value of your business
1. Is your business demonstrably profitable?
As Charles Gaudet, an experienced BDC
It generally takes healthy profit margins to attract really serious interest. So work out what you can do in the short term to boost sales and drive down costs.
Recurring revenues are particularly eye-catching for prospective buyers, as is a growing, diversified customer base.
And now is definitely not the time to start withdrawing excessive amounts of money from the business.
The worst thing you can do is concentrate on the sales process to the detriment of the business’s day-to-day operation. If profits slip in the months leading up to a potential sale, then it’s all the harder to realise a satisfactory sale price.
2. HR capital
You should be able to demonstrate that your company has a high-quality workforce – especially at management level – ideally with a low staff turnover in critical jobs.
Make sure all your HR processes are documented and that documentation is up to date. If you don’t have an employee handbook setting the framework for employee conduct and the employee-employer relationship, then it’s worth compiling one.
3. Market differentiation
Can you convey the unique features of your business and how they help you stand out from competitors in your sector?
Help your business command a premium price by obtaining customer testimonials via email campaigns or feedback cards, and by documenting positive reviews from independent customer review sites.
Obtain patents, copyrights or trademarks, where appropriate, with the help of an intellectual property lawyer.
4. A well-ordered house
Make sure your balance sheets, assets, liabilities and taxation are documented appropriately and up to date – with the help of an accountant, if necessary. Buyers primarily want to know the hard facts about the business, not its intangible, future potential.
Only paperwork can substantiate your claims about the business's profitability.
Nevertheless, a strategic plan that maps out future opportunities for diversification or expansion and how these might be realised will also reassure buyers that the investment is a sound one for the long term.
First impressions count where your premises are concerned. At the very least, tidy them up and make them as presentable as possible. Perhaps give them a lick of paint, new carpets and so on. Make sure all equipment is in good working order too.
Consider finalising any outstanding customer or supplier contracts, leases and other agreements, or renewing those nearing expiration.
5. Adopt a buyer’s perspective
Lastly, you can check your company’s readiness for an exit by attempting to appraise it from the buyer’s perspective. Ask yourself: Would I want to buy this business? Like any business it will have shortcomings – address them, if practical and affordable to do so in the weeks or months before you hope to finalise a sale.
Incomers will expect to find a happy atmosphere with a committed leadership team and keen, knowledgeable staff; a popular brand on an upward trajectory; and a well-resourced outfit with highly marketable, distinctive features.
In short, they want a business that is thriving now, with strong evidence that it will
Many of the features which make your business saleable are simply the defining characteristics of any efficient, well-performing going concern.
So far from distracting you from the effective running of your business, a proper exit strategy should help you prioritise what really drives revenues and shed any bad habits you’ve acquired over the years.
Let’s conclude with some sage advice from BDC consultant Charles Gaudet: “Planning and preparation for a transition can take years. Entrepreneurs need to take the time to do it right.”