Perhaps you've owned your business for some time and now wish to retire, or maybe you have outgrown your current business and wish to pursue other avenues. Whatever the case, there are some steps to take before you put up that 'For Sale' sign. Getting into the right mindset to sell your business is a process, and here are essential points that will help set you on the right path.
The value of the average business has been low for a few key reasons. In my experience, little effort has been invested by most owners in removing inefficiencies from their businesses, thereby reducing its asset value in the process. There is no point to putting more business through incapable systems. With inefficient businesses often comes a heavier reliance on the owner for the day to day running. Apart from the obvious frustration and disillusionment that creates for the owner it is also a major limiting factor to the business value.
Increasing business asset value is crucial when one is considering selling as part of their exit plan. There are many ways to value the potential of business besides the bottom line. A business appraisal is a good way to begin the valuation process to assess where there might be some key areas to focus on to lift the overall business valuation. Such an appraisal will help prioritise the most important things to be working on first and foremost. It will also assist to make more informed decisions about the future.
Now that you know what your business is worth, you need to make sure it looks the part! A positive trend line of your sales growth can provide confidence that the business is working well - making your business attractive to potential buyers. Business performance should be optimised and the sales and profit trend lines show a continuous and predictable improvement.
Make sure that all the elements of a great business are in place. Outlined below are four distinct tips to make this happen:
Make sure that, wherever possible, the future revenue of the business is locked in, preferably with long-term contracts. A buyer of the business needs a degree of certainty of the five-year revenue outlook so contracts with customers need to be robust.
Establish a management infrastructure that removes reliance on the owner. The management skills and experience (and processes) to lead the business in the absence of the owner need to be in place.
Protect the brand of the business. This includes your web presence, social media, patents, and other intellectual property protection.
Reduce the debt levels of the business in order to clean up the balance sheet.
Hopefully this has helped you begin thinking more objectively about the sale of your business, and has given you some direction in the process. If these tips are rigorously followed over a period of 2-4 years, the probability of getting a good price for the business is maximised. Selling a business can be a long road, but with the right mindset, it will be all worth it.