Value Added – Tips for Selling a Business, by Jo Haigh

Jo Haigh

 

When a property doesn’t sell, an estate agent worth their fee may recommend that some rectification or improvement work could improve the selling chances.

For instance, just because you like deep purple walls, this doesn’t appeal to everyone. There’s nothing like a nice coat of magnolia to improve that first impression! Likewise adding a new £10k kitchen could not only sell the house in question a little quicker, but may even add £20k to the asking price.

Selling a business is no different really. In terms of pre-sale grooming, there are multiple things that create more appeal.

Some are quick fixes, others need to be planned and implemented years before. Here is a selection for a savvy vendor to consider:

– Tie in your critical staff, there are multiple incentive and share schemes that would achieve this. Key acquirers will need some assurances that the key staff will remain post sale if they need them to.

– Make yourself completely dispensable. If you are the business it won’t sell without you. Remaining in post in one form or another is often very challenging.

– Have first class and easily auditable information. Part of a sale process involves something called due diligence. This is where a buyer and their team check and verify data and assumptions. I can tell you with absolute certainty that no one ever goes into such a process coming out offering more than they went in with, it is rather an opportunity to chip at the value.

– Work on the basis that if your business is reliant for more than 15% of its trade with one customer, unless that customer is irrevocably tied into the company (and that includes being under new ownership) this will also provide a possible stumbling block on a sale.

– Likewise product and market development must be seen as being proactively increased and reviewed.

– Out of date IT systems and ignorance of social media potential, although not in themselves deal breakers are unlikely to enhance sale potential.

– Conversely market domination could also prove a problem unless the purchaser is seeking just to take a key player “out ” so to speak, as the question would be ‘’where can this business be taken?’’

– Clean stock and WIP along with a tidy debtor book should just be part of good business housekeeping, but sadly this is not always the case. If you have a load of uncorrectable debts and unsaleable stock, the time to reveal this is not mid-sale process.

So to get a better value and a quicker sale, start your refurbishment as soon as you can.

 Jo Haigh – Partner at fds Corporate Finance and Cracking Boards
Email: Jo.haigh@fdscfs.com
Telephone: 01924 376784 / 01484 860501

The winner of the Sunday Times NED of the year award, Claridge’s 14th March 2013.

My latest book: The Keys to the Boardroom, how to get there and how to stay there, due for release October 2013.

 

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