There are four key areas to get your business ‘sale ready’:
1. 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 overreliance 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 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.
2. Build a story around your financials
Having the right financial reporting in place over a period of years is key to developing a story which will help a potential buyer to 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, will all increase the value of your business. They may also differentiate you from competitors and help to achieve a premium sales price.
Strong financial performance during due diligence and negotiations will also provide additional confidence to the prospective buyer. Poor financials send the wrong message to the buyer. Good quality, up to date financials not only makes business sense, they also enhance a buyer’s ability to value your business and rely on the financial results.
3. Use your data to become more efficient
As an established business, you will already have a lot of good data. As such, enhancing the organisation’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 non-recurring items and steps in the value chain, then look at processes to eliminate anything that does not add value.
A ‘lean’ approach to value chain mapping enables you to give a potential buyer a clearer overall picture of your business and also allows you to pinpoint areas of the business where you can boost productivity, start to innovate and, over time, improve profitability.
4. Step back and seek support
When selling your business, it is important to seek advice. An experienced advisor can help make your business ‘sale ready,’ maximise its value and support you in executing a successful transaction. They can also clarify your business’ mission and values, gaining a better understanding of the commercial direction.
Taking a step back from the business that you have put so much time, money and effort into is difficult, however taking a more objective approach ensures that any tax or earnings issues which may arise are identified and dealt with prior to a sale. This not only minimises and reduces risk, but ultimately shows any buyer you are committed and organised. 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 up 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.
Want to know more?
Want to know more about making your business 'sale ready'? Feel free to contact Remco Schoonderwoerd by e-mail or telephone: +31 (0)88 277 16 45 or Aron B. de Jong by e-mail or telephone: +31 (0)88 277 18 00. They will be happy to help you.
The original article is written by Michael Rofman , Partner Mazars USA.