PLANNING YOUR EXIT

SELLING YOUR BUSINESS FOR WHAT ITS TRULY WORTH.

In every successful business owner’s life, the day dawns when they want or need to transition out of their business.  Maybe they’d like to work less and hand over their business to someone else.  Maybe they want to sell and sit back enjoying their retirement.   Whatever the next stage is for an owner, most want to achieve a good price for their business.  With this in mind, we’ll canvass in this Roar, and the next couple of editions, how business proprietors can achieve a smooth successful sale.

START WITH THE END IN MIND

To achieve ‘top price’ for a business, owners should review, assess and where appropriate, improve processes operating within a company a couple years out from when they want to sell.   This exercise will see differing factors evaluated. That said, some common elements exist amongst all businesses irrespective of the goods/services they offer.  To help owners, we’ve listed below the rudiments we think business proprietors should investigate.

• Systems and Processes: All buyers want to buy a well-run business. Accordingly, business owners should review their systems and processes to ensure they are effective and efficient in terms of operating the business.  This evaluation may result in some changes occurring to streamline operations.  Additionally, it may be appropriate for a business owner to document their systems and processes, making it easier for a potential buyer to carry out their own due diligence and to run the business when they are in the owner’s seat

• Strengthening Financial Performance: A business that has a steady positive cash flow is more appealing than one that has fluctuating cash flow, especially where that position enters negative territory. Thus, owners should review their terms of engagement and aim to control their debtors in respect of the number of days it takes to get paid.  If necessary, action should be taken to collect outstanding accounts receivable. Creditor terms should also be looked at, to ensure the business is making payment when debts are due and hopefully after debtors have paid. 

• Improving The Balance Sheet: A business with a strong balance sheet is attractive to would-be business owners. Accordingly, action should be taken to repay debt and unencumber plant and equipment.

• Increasing Profitability: Business that have a track record of turning a profit are easier to sell than those that lose money.  Hence owners should act a couple of years before placing their business on the market to boost their company’s profitability by improving their margins, reducing their costs and improving their revenues.  This may involve reviewing and altering operations, negotiating better deals with suppliers and building market branding and customer loyalty.

• Nurturing Client Relationships: A key ingredient profitable business have are loyal clients. Clients who are bound to a brand create a steady pipeline of sales and income.  Whilst many different strategies can be invoked to build client loyalty, the main component is providing good old fashion customer service – being responsive to client needs, doing what you say you will do, delivering on promises.  Given this, business owners should ensure all staff are aware of the value of providing excellent customer service.  If necessary, this should be made a key performance indicator employees must meet.

• Invest In Growth: Prospective buyers purchase businesses with futures in mind. Accordingly, business owners should consider investing to grow their business.  This might result in new markets, services and/or products being explored, research and development being undertaken or new resources being used for example.

• Managing The Business: Businesses that have a strong management team, independent of the owner, are often more saleable, and will command higher prices than those where the owner is hands on, has all the key relationships, etc. With this in mind, owners should start delegating, training and transferring tasks and responsibilities long before they put their business on the market.

SUMMARY

Clearly getting your business ready for sale takes time and may require change as this article suggests. We’ve provided you with further tips on how you can improve your chances of selling your business for what it’s really worth in other articles you’ll find on our website.  Be sure to read up on them.  Finally, remember to chat to your Lion Accountant well in advance of the sale process as they’ll assist you to achieve top dollar for your company, reflecting all the hard work you’ve put in over the years.