How to get your business in top shape to sell
Selling your business rarely works well if it’s a hasty decision. So don’t leave things until you decide to retire or find managing the business has become too much. The market is quite dispassionate about such events, and sellers stricken by illness or feeling the burden of advancing years can easily find themselves attracting the attention of ruthless buyers.
Some experts consider it can take the better part of a decade to get a business in good enough shape to make it a really saleable commodity. And whether or not selling is already part of your future plans, a business which is really fit to sell is not only an attractive proposition to potential buyers – making it genuinely saleable is also an excellent way of running a business too. So here is a checklist of essentials to help you develop a realistic exit strategy whereby your business becomes a sellable option.
1. How will the business survive without you?
Having built up your business through your own efforts, it’s obvious that your creativity, enterprise, motivation, judgement, charisma and a host of other attributes are top-notch. However, if you remain the key asset of your business, it is extremely unlikely you will easily find a willing buyer.
This common ‘dependency’ scenario poses too many risks for a serious investor. A company is not only much stronger if it does not crucially depend on its figurehead, it’s also more commercially viable and thus more valuable to a buyer.
2. How secure is your revenue?
It’s quite common for the business valuation process to look at the annual revenue of your business, but the multiplier applied to that figure to arrive at a selling price will primarily depend upon an assessment of the stability of that income return.
Recurring income streams in the form of annual subscriptions, contract renewals, and business agreements which link clients to company products or services form the best evidence that your business has long-term prospects.
Such fiscal infrastructure is hard work to put in place but, far more than intermittent receipts of substantial cash sums, clearly demonstrates a potential buyer would secure a business in good financial health.
3. Have you developed home-grown talent?
Talented insiders who have risen through the ranks, and original in-house products which build and reflect a company’s image and reputation, are both indicators of a genuinely sustainable business concern. Each make powerful statements about a company’s ethos and dominant business culture.
Regarding employees, the regular hiring of industry outsiders in key positions, instead of internal promotions, carries somewhat negative connotations for a neutral assessor and is bound to prompt searching questions about career prospects and staff retention. At the very least it suggests staffing, which should be a prime asset, is actually expensive and unpredictable
4. What are your real assets?
A business is purchased for its revenue stream, diverse client base, technologies, or staff expertise, and though a handful of exceptional companies may have acquired all of these, any valuable enterprise must be able to offer at least one.
Buyers will be looking for growth and potential, so only a successful business in good order with one or more ‘bankable’ assets will have serious appeal.
5. Does your business already have a future?
If you can’t see a future for your business, neither will any serious buyer.
So if, in your opinion, your business does have viable prospects, what are your plans? Even if you are not yet thinking of selling, you will need to assess where your company might be in one, two, five, and maybe even ten years’ time.
Charting your future progress is not only a good commercial discipline, it’s a tool which shows a would-be purchaser that you see real potential down the line, and helps them to see possibilities too. In addition, it also represents positive proof that you really are selling a ‘going concern’, and not just trying to offload a ‘lame-duck’.
And finally, when you make the decision to sell, find a professional business broker to manage the process. This will ensure your business is successfully marketed to the right buyers in a manner which properly reflects those major assets you have worked so hard to develop.
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