Increase the Value of Your Business = Success

Businesses often do not sell for the price you wish because you do not prepare them for sale. I do not mean the basic elements, like financial statements and a real business. Those are a given. Rather, I mean items that create value above and beyond the company’s asset value.

First, you need monthly financial statements, so you may have a road map of where you’ve been and a plan for your future (budget). (For past years also to prove your success) Comparing the budget with actual each month keeps you on task regardless of your company size.

Second, a solid organisation is fundamental. For the big pay out, you must have grown the business into significant sales (say £1+ million) and have people covering the three functional areas: getting jobs out (production or operations), getting jobs in (creating demand or sales) and getting paid (finance). 

If you operate your business from the position of a press operator (print business), then your only choice is to sell it to someone who wants to be a press operator. You will never get the big payout that way.

You cannot be detached from the business either. You need to be involved with the business working in/on the business and that means sales or operations. Do not trap yourself into analysis paralysis curled up with the financials and lose sight of your main asset, people. That said no function should be totally dependent on you, so no function shuts down when you sell the business.

Now move to these items I have cited some of the following in a recent post;

Does the business have value that is derived from what it owns, rather than who the current owner is?

Does it have an appropriate brand name, matching website, specialised phone number, location, logo, specialty technology or secret recipes?

Are employees just waiting for you to sell to call it quits themselves? Or do you have a good mix of ages and skills amongst workers, so they can carry on for the new owners?

Do you have adequate and enforceable employee contracts in place, so employees will not start a competing business, for instance?

Do customers buy from the company because of price, value, reputation, quality, location, convenience or unique product/service offerings? These are attributes of the business. Or do they buy because of a personal relationship with the owners or key employees? That goes when the business sells.

Can you replace your current staff or are workers “irreplaceable?” Although you’d hate to lose anyone, can you reasonably find and train someone to do what they do within a reasonable time within the local market? If they are truly “irreplaceable,” then that is a problem/issue. 

Is your location a significant factor in attracting customers? In some cases, it could be a key. A barber provides a personal service and usually doesn’t have much to sell. Yet, a barber with a key location beside a military base may be uniquely situated so another barber will be willing to pay for it and add value to the deal.

Are sales highly reliant on the efforts of any one individual? If that person leaves, it is a problem/issue.

Importantly, how’s the customer mix? Does the top customer represent 20% or more of total sales? If so, the value can decrease. Does the business have a diverse group of significant accounts? Who “owns” the business relationship, the company or the sales guy?

Does the business rely on a limited number of suppliers based on the owner’s personal relationship?

There are many more but you can get the idea from the few above. There are no fixed rules on how the business “must be.” Rather look for threats and eliminate them. More simply, grow the business and grow along with it to maximise your business’ worth.

A Senior Team To Take It To The Next Stage

Has your senior team got the right people in place for the next stage of growth or have you still got some left-over fellow-travellers who do not really deserve their seat in the board room for any other reason than long service (or their family name)? Through the eyes of the buyer/funder, do all your board members still add real value to the business?  Can the business continue to flourish without the current owner(s)?

So which is it? Time for a sharp exit – you need time for your exit strategy to kick-in Time for a sharp exit - you need to plan the timing of your exit? Time for a sharp exit – your exit needs to be swift? Time for a sharp exit – you need to start thinking about how you are going to exit the business…

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Plus,

`Buying a Business` and `Due Diligence Guide`

Details below.

`Buying a Business`

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`Due Diligence Guide`

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