Considerations when preparing for a sale
Of course, this is size and sector dependant. It also depends on who the likely buyers are and what they are looking for.
Timing
In nearly every instance the buyer will be looking to for a smooth gradual handover to ensure the continued success of your business. This can take time and is generally 1-2 years, so worth considering in your own exit strategy. You can say ‘the business doesn’t need you’ , but a flexible approach will give the buyer confidence and in turn help unpin or improve the price paid for your business.
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Management information
The clearer the systems , software and reporting are; the easier it is for the buyer to see the opportunity, it demonstrates a well-run company. Throughout the sales process it is imperative to ensure data is consistent, forecasts are not too ambitious and potentially have one central point supplying the data to the buyer’s team. If systems aren’t in place and reports readily available, it doesn’t instil confidence for any buyer and again this could be reflected in the price paid.
Processes and legal records
It is good practice to have all your process documented so it is clear to see how the business works, to define the roles and responsibilities, ensure all employment contracts and Health & Safety documentation are up to date. Again this shows a well run company and will instil confidence in the buyer.
Second tier of management
This again is buyer dependant – the buyer may have a plethora of budding Managing Directors waiting for an opportunity, alternatively if you are of ‘a size’ and selling to private equity, they will be expecting a competent management team in situ.
For a sub £5m turnover company, this may be a challenge too far !, to have a fully functioning second tier management in place, can be a challenging step to introduce unless done gradually over time. It can be time consuming and often expensive to make this transition unless you are experienced within the process.
Sales and clients
Generally, for established businesses this difficult to swiftly change. Buyers will be looking for a good spread of clients , across all areas of the business with a robust proven income stream. Again, sector dependant , this may be demonstrating your lead generation process – so good to have this documented. Some business may have repeat business from a number of long-standing relationships, this does not necessarily mean contracts are key, in fact the downside with contracts is they give a set review date for others to bid on the work, which dependant on timings is not in anyone’s interest.
Confidence
To maximise the price received for your business it is about instilling confidence in the buyer all through the process.
You will maximise the price received by highlighting the longevity of the opportunity and making it clear for any buyer to understand.
Finally, if the time isn’t right now, by instilling, observing and preparing your business for a sale; your will hopefully make more money along the way and be more prepared when the time is right and hopefully achieve a higher selling price as a result.