Is Your Business Sale Ready?
If somebody walked into your business today, cheque book in hand wanting to buy your business, could you ask maximum value for it? Are the books up to date? Will you have to train the new owners?
Or could you simply hand over your operations manuals that explains, “This is what we do, this is what our customers can expect!”
Consider if you were the purchaser, what would you purchase? A business that is structured, systemised and documented or one that has no direction, requires long hours on your part and has no systems apart from the owner doing it all?
10 Ways to Maximise the Sales Value of Your Business
Business owners often ask me what they must do to maximise the sale value of their business. It is not simply the bottom line that determines the sale price.
The most common issue is that the business simply will not operate effectively without the business owner and, when this happens, the business is worth very little, no matter how good the bottom line.
So you must think like a buyer and focus you on those areas that will create additional value and make you redundant from your own business in order to maximise your sale price.
For many the following are key strategic areas to consider:
- Customer Diversity – If a large part of your business relies on a small number of customers, it can be a negative. So start focusing on diversification. It is important not to have all your eggs in one basket.
- Management and staff – Ensure your business has a clear goal and that your team both understands it and their role in delivering it. If you have a great team in place, make sure they stay on during the transition process.
- Systemisation – A buyer will have a greater value and desire for getting into a business where the processes are streamlined and systems are in place. Make sure you have a written system for all those business activities that are repetitive so they can be done consistently and quickly by anyone. No one person is vital to the successful running of the business – least of all you – the business owner.
- Recurring Revenue – All revenue is not the same. If you have recurring revenue as a result of a contract or agreement like annual licensing fees, maintenance fees, etc. – these are much more commanding drivers of value than revenue $$ that result from projected sales or other such non-recurring revenue streams.
- Desirable Proprietary Products/Technology that cannot be copied easily – A buyer will tend to value a business with unique products, services or systems higher than one that is considered as a “me too” business. So, find out what is unique about your business, and then think of ways in which your product/service is unique. Communicate this uniqueness effectively and you will be able to increase the desirability of your business.
- Team of professionals – Using professionals like accountants and lawyers will help reduce the buyer’s perceived risk. It is essential to get your financials audited by a reputable accounting firm and use a good solicitor to go through the papers.
- Product Diversity – A broad range of products/services to reduce risk and hence increase value.
- Key Performance Indicators (KPIs) – Make sure that you have a clearly defined and meaningful set of KPIs that not only show how the business is currently performing but also help demonstrate how it performed over the past year – this will demonstrate clear trends.
- Written Growth Plan – A 2-3 page long written, strategic growth plan that identifies and lists the areas your company is expected to grow. This can help maximise its value.
- Book Keeping – Your style of book-keeping will greatly influence the buyer as this is an indicator of how your business was run in the past. A good quality book-keeping system also reduces the risk and helps during the due diligence stage.
By following the points above, you will be able to achieve just that. In this manner, you will be able to shorten the sales cycle and maximise value.
- Join our Kick-Ass Tradies Facebook Group, for access to trade business specific conversations, tips and resources, plus a like-minded community of tradies.
- Book a 15-minute Game Plan Call with Andy, owner of Dr. DRiP plumbing and co-founder of Lifestyle Tradie, to clarify your priorities and get clear action steps.