If you’re looking to sell your business you’ll probably see quite a few articles with a list of items you should have in place to maximise the sale value and ensure the sale process proceeds smoothly. But is that enough?
The usual recommendations on what you need to do to prepare your business for sale include:
Legal
- Business name registered
- Trademarks and any other Intellectual Property protected
- Supplier contracts in place
- Lease for the premises is secured with flexibility for the future
- Equipment leases on hand
- Major customers secured with written agreements
- Current licenses and permits
- Current and compliant employment contracts
Financial
- Trading records managed through a solid accounting system
- Tax obligations paid up to date
- Profit & Loss and Balance Sheets showing a healthy result
- Cash flow projections completed (even though the buyer may have their own ideas for financing)
- Capital requirements and funding sources documented
How to get the maximum sale value
That’s all great, and will certainly help the Buyer undertake Due Diligence during the contract process.
But that’s not all a Buyer will be looking for to warrant paying maximum value for your business. Especially a savvy Buyer who will be looking for the future potential of your business, not so much what has happened in the past.
In fact I’ve seen incoming business owners who have really struggled to make the business ‘work’ as they had expected because they don’t really have a handle on the intangible factors driving the business. The sales figures and financial data presented when they were looking at the business as a Buyer may have been accurate, but the numbers alone don’t tell the Buyer what makes the business tick.
Stuart Ayling
Fire or fizzle
The tangible (or ‘hard’) items listed above are very much on the analytical side of the Buyers decision-making process. The other side you need to consider as a Seller are the ‘soft’ or less tangible aspects of the business which will ultimately make the business fire or fizzle.
These ‘soft’ aspects can be considered under two headings, Plans and Culture.
Plans
- Operational business plan – an action plan for your business, including the systems used within the business to maintain quality and consistency
- Sales plans – including marketing activities and sales activities required to reach the revenue and profitability goals set for the business
- Workforce planning – to ensure your business has the right skills, the right people in the right roles at the right time into the future, and could include a Learning and Development plan
- Knowledge management plan – this can be as simple as having a CRM (Customer Relationship Management) system in place that is actively used to store customer data and communications, or more advanced systems that capture knowledge tacit and explicit knowledge from the whole team
Culture
- Understand The Essence of the business – everybody recognises the culture of a business is important for its success, but ‘culture’ is an ambiguous term. What does it really mean? Importantly, a potential buyer of your business will want to know how they can maintain (or improve) what you have already established. What will they need to do? That’s why it’s important to identify and articulate The Essence of your business, including the ABC’s that drive and maintain culture on a day-to-day basis. (Read more about Affirmations, Behaviours and Customs)
- Vision for the business – this will give the Buyer an understanding of why things are being done a certain way, or help them see the unique aspects and opportunities ahead
- Values within the business – this can help the Buyer see how closely their own values match those of the current business, and the impact this may be having on the current success of the business
- Clarity of roles – to ensure every team member understands the outcomes they contribute to, how their performance will be measured and how their work intersects with others; enabling the Buyer to have confidence in the performance of the team
It’s a valuable business improvement journey
Sure, this sounds like quite a bit of work to get it all ready. And that is correct. That’s why if you’re planning to sell your business for the maximum value you should really be planning at least a few years ahead, maybe up to five years ahead depending on how many of these items you already have in place.
Whilst it’s easy to read over a list like the ones above and think “Yes, we should do that”, in practice it takes many months to develop the right approach, understand the nuances of the business, record what needs to be documented, and tweak the processes (or add entirely new ones!) as you go – all while maintaining business-as-usual and bringing your staff members along the business improvement journey with you.
You must have a methodical approach – including sensible planning, structured reviews and accountability processes – to follow through on the areas you wish to improve. Otherwise you risk the whole journey stagnating, frustrating both yourself and your staff.
You’ll be energising your team and yourself
And a word of advice for any business owner who is thinking they don’t want to do these things because their staff would find out they intend to sell the business – that’s the wrong mindset. You don’t need to mention your future ownership plans, it’s simply not relevant for the team. Focus on the improvements you are aiming for.
By actioning these items you will encourage your team to be more proactive and engaged, and you’ll be creating a sustainable business that will give you options.
You never know, you may ultimately decide to keep the business rather than sell it; especially if you can remove yourself from the day-to-day operations and have the systems in place to maintain control and insight into operations.
Next step
Would you like a free no-obligation discussion to assess the next steps in your business improvement journey? Get in touch, we’d love to hear from you.
