For business owners looking to sell their business as part of their overall retirement strategy, there are some practical measures they can apply to maximise its value.
By focusing on the value drivers in the categories: sales and marketing, operational, financial, legal and on point of sale, owners can optimise the value of their business in order to obtain the best sale.
Sales and marketing
Owners will help boost revenue for their business and lower their dependency on their primary clients by expanding their client base. By marketing their products or services to different sectors they will reduce its liability to a downturn in that region. If they adjust their costs and services to industry standards, then buyers will have a better chance of retaining their clients.
Owners that drop their prices make it difficult for buyers to expand their business and offer more desirable packages to continue delivering quality service. It is also important for the business to have staff that can complete the sales function, so that buyers are not at risk of losing sales when the owner leaves.
Operational
Owners must ensure the business can operate without them before they sell. It will be more appealing to a buyer to have the freedom to work when they want rather than having to spend their time resolving daily issues. Installing an efficient management structure will assist with making the take over smooth. It is also crucial for the owner to confirm the business has the right accreditations and company policies. It proves to buyers the business complies with regulations and that the business can run without the owner.
Financial
Producing an outlook of the following year’s revenue and profit will convince buyers of the potential for growth. An owner should have a management accounting system in place to be able to prove the credibility of the outlook, which presents the revenue, costs and profits from each client every month in a clear and concise manner. Showing the revenue received from each client will further confirm to clients that the business does not rely on its top clients.
Buyers will be more inclined to purchase a business with no overdue accounts. Hence, owners should make sure that all of their clients are up to date with their payments.
Legal
It is essential for owners to inspect their contract documentation to reduce the possibility of conflict or potential claims. This requires going over client, supplier and employee contracts, including terms and conditions and making sure they are correct.
On sale
An owner may have to sign a non-compete agreement to reassure buyers that they will not continue to contact their clients for business after the sale. It is worth noting that an earn-out deal rather than a downright payment, will help convince buyers of the continued strength and profitability of the business. Look at the business in the eyes of potential buyers and identify what needs to be modified to make it easier for them to make a return on the investment.
