Preparing your business for sale
Once you have decided to sell your business you want to achieve a sale at a fair price. Preparing for the sale prior to staring the sales process greatly improves the sale going through and achieving a good price
Preparing your business for sale takes time (often 6 – 18 months) depending on what you have in place today. Make sure you plan ahead.
A lot of business owners receive an offer from a potential buyer and then go about trying to tidy up their business alongside an ongoing sales process with the potential buyer watching each step. This does not help the completion of a sale and decreases valuation
Look at every aspect of your business as if you were the buyer. Basic areas to check and improve if possible include:
- Where does you company sit within the market place, vs competitors and at which point in the sector cycle (if cyclical)
- What are the growth prospects of the business? What are the threats?
- How secure are you revenue streams? Are client contracts up to date, what is the strength of relationships, client loyalty
- How loyal, experienced and skilled are your staff? How have you tied the senior management and best performers to the business?
- Is every item in your cost base delivering value for money? If not, remove or reduce
- Is your financial information available and accurately reflecting all aspects of your business?
- What does your balance sheet hold? Are there any issues with bad debt or the market value of assets below their book values? Is there an investment overhang to get equipment up to date?
- Are your systems robust, efficient and scalable?
- What is your investment in working capital? How does this compare to competitors?
- Are all liabilities captured within the financial information?
Each sector and company is different so the above is just an indication of some of the typical areas investigated during due diligence
Privately owned business with owners approaching retirement
To prepare the business for sale and maximise value
All areas of the business were investigated. Improvements were made in all critical areas and financial and operational visibility was increased significantly.
The business valuation during this 24 month period increased by a multiple of 10
Who are you planning to sell to and what are you selling? A trade buyer and a financial buyer will each have different focuses and requirements
A buyer wants to understand what they are buying, requiring clear and extensive financial information as well as operational, staffing and legal information. If this is not available , the price offered is likely to be reduced
Do not take short term cost cutting or under invest to push up profits as these can damage your business capability. Focus on building long term value in the business and demonstrate what this means for the future and a potential buyer
Increasing sustainable profit is the most important way to increase the business’ value. Other areas that add value might include:
- Building a strong management team that can execute well
- Ensuring efficient and scalable systems and processes that provide control of the business
- Lengthening or locking in revenue streams
- Building business capability e.g. sales teams, marketing, operational or support functions
- Sustainably reducing working capital or CAPEX investment
Many of the actions to improve a business prior to sale are good practice at any point.
It is usually better not to discuss you sale intentions with your staff or other stakeholders until very late in the process. Many things can go wrong during a sale process and your staff will not like the uncertainty
Contact us for a free confidential discussion of what is needed within your business to prepare it for sale
Adding real value to your business takes time and teamwork
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