Preparing to sell your business
Preparing to sell your business
It's never too early to start making your business "sale ready." Implementing several practices now with make the eventual sales process much smoother and enhance your company's value to a buyer.
Here are four areas critical to getting your business "sale ready":
Identify issues and fill in gaps
It is important that when preparing for sale, you first identify potential red flags to a buyer. Is there over-reliance on you as the owner: Can your business and management team continue to operate and grow once you step down? Do you have proven and credible sales processes in place? Can you show that you regularly track your key performance indicators (KPIs) and are aware of how you measure up against your best-in-class peers or closest competitors?
A well-run, professionally managed company will help you make your business more appealing to buyers. Taking the time to identify the issues and bridge the gaps before a deal is on the table will almost certainly lead to a better sale price.
Build a story around your financials
Having the right financial reporting in place over a period of years is key to developing a story that will help a potential buyer identify patterns of past, present and future performance. This includes being clear on important information such as key customers, and metrics such as profitability per customer, which may involve detailed analysis across multiple sales channels.
Accurate sales forecasts based on solid data and being able to illustrate strong, sustainably growing profits, growth opportunities and potential future profits all will increase your business' value. They may also differentiate you from competitors and help to achieve a premium sales price.
Strong financial performance during due diligence and negotiations also will provide additional confidence to the prospective buyer. Poor financials send the wrong message to the buyer. Up to date and accurate financials not only makes business sense, they also enhance a buyer’s ability to value your business and rely on the financial results.
Use your data to become more efficient
As an established business, you'll already have a lot of good data. As such, enhancing the organization’s value is about positioning this information in a structured format to enable better and faster decisions. Identify ways to become more productive or innovative by mapping recurring and nonrecurring items and steps in the value chain, then look at processes to eliminate anything that doesn't add value.
A "lean" approach to value chain mapping enables you to provide a clearer overall picture of your business to a potential buyer. It also allows you to pinpoint areas of the business where you can boost productivity, start to innovate and, over time, improve profitability.
Step back and seek support
When selling your business, it's important to seek advice. An experienced advisor can help make your business "sale ready," maximize its value and support you in executing a successful transaction. An advisor can also clarify your business’ mission and values, gaining a better understanding of its commercial direction.
Taking a step back from the business that you've put so much time, money and effort into is difficult. However, taking a more objective approach ensures that any tax or earnings issues that may arise are identified and dealt with prior to a sale. This not only minimizes and reduces risk, but ultimately shows any buyer you're committed and organized. To further reduce risk, particularly at the post-due-diligence stage, you should consider representations and warranties insurance.
Ensuring your business is sale ready even before you put it on the market can provide a clear sense of direction, strengthening internal controls and financial processes. By identifying gaps and tracking performance, you can leverage data and build a business story to attract potential buyers.
To find out more about how we can help you make sure your business is optimizing its performance and ensure that you are sale ready, please contact us.