How do you present your business to make it really saleable, by business and finance expert Jo Haigh.
There are numerous ways of valuing a business but only one that works; that is the price you are prepared to accept and the buyer is prepared and is able to pay.
What you can do though is portray your business in the best possible light so even if you are not making desirable profits, or even any profits, you can still sell your business for the best possible price.
Although the analogy of selling your house to that of selling your business may seem trite we all know that from those terrible TV shows such as house doctor a little bit of TLC and the un-saleable miraculously moves to most desirable.
None of the following alone will take your business to prime position but they will in no way harm the sale process.
So what counts in making the sale?
1) Management. The more the business relies on you the less valuable it is. You need to make yourself redundant as quickly as possible a buyer of whatever nature will then have no worries if you exit stage left at completion.
2) Brand awareness. Even the smallest business should create some sort of brand as even if the buyer intends to dispense with it on acquisition it will be what, in part, attracted them to you in the first place.
3) Market position. Actually not that good to have the market sown up as this suggests. Little or no room to expand conversely, if this is what is going to attract your buyer, make sure you have evidence of investment in R & D.
4) The Puerto says that for most businesses 80% of business will be done with 20% of your customers. What is damaging to value is where 25% or more of your business is with one customer and even more so if there are no novation rights in the contracts.
5) Good books and records, particularly financial. If you can demonstrate that your management accounts are very consistent with your financial statements that gives substantial confidence to the acquirer day one
6) Motivated staff, loyal to the company. A little more intangible and difficult to quantify but if you can demonstrate this all the better.
7) Fully patented and registered products. Where relevant the confidence this give to a buyer is immense
8) Realistic trading terms with your suppliers and customers. Equally you will need to demonstrate these are adhered to.
9) Proper HR records and sensible contracts. As staff always TUPE over to new co the buyers want confidence staff are being treated properly in this ever litigious environment.
10) Good advisers on both sides. Including qualified corporate financiers and good commercial lawyers. The difference this makes is immense mainly because such teams all speak the same language and hopefully, if you choose well, have grown up and aren’t into point scoring; the kiss of death for lots of fragile deals.
One of the nicest things said about myself was from the buyer on a deal I was acting for the seller;
“On the opposite side of the table to Jo I found her a talented negotiator with the best interests of her client in mind at all times and excellent peace making skills.”
Ian Kinman, MD European Operations, PRG-Schultz – we can provide contact details if requested.
Which I think supports my point.
Jo Haigh is an expert on business and finance… check out her books here!
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