Preparing for Sale
Position Your Business for a Prospective Sale
Think like a potential buyer, who would be interested in purchasing your business and what could be their motivations?
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There are certain proactive measures that every business owner can undertake in anticipation of a future sale. These strategies not only augment the probable value of the transaction, but also expedite the sale process and facilitate its execution when the time comes. Regrettably, many entrepreneurs lack a clear understanding of these necessary steps or fail to execute them. Based on the insights gathered from our cohort of entrepreneurs who have undergone the process of selling their business, we outline the key areas that every business owner should focus on in preparation for a potential sale.
Hire People Who Can Build And Lead The Business For You
Engage individuals who have the requisite expertise and leadership capabilities to efficiently direct and expand your business. It's crucial to acknowledge that for numerous potential investors or buyers, the presence of a skilled and trustworthy management team is a vital consideration in any business transaction. Relinquishing control can be daunting for many, but if you're aiming for a seamless transition or one that maximises your business value, it's essential to establish a business that can function autonomously of you.
Focus Continuously On Building Value
Building value is one of the most crucial aspects of growing and sustaining a successful business. This process not only drives the profitability of your enterprise but also positions it as an attractive asset in the eyes of potential buyers or investors. Here are some ways to relentlessly focus on building value in your business:
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Understanding and meeting your customers' needs.
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Continually innovating to stay competitive.
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Building a strong brand that inspires trust and loyalty.
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Developing and retaining top talent.
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Streamlining operations for efficiency.
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Adopting sustainable and responsible practices.
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Consistently monitoring and improving financial performance.
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Demonstrating scalability in your business model.
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This process requires a relentless focus and strategic approach, with every decision made aimed at enhancing value for all stakeholders.
Identify And Eliminate Potential Deal Killers
Another critical step towards maximising your business value is to reduce the risk of potential buyers uncovering unexpected issues during the deal process.
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First-time sellers frequently believe their business is well-prepared for a sale when, in fact, there might be several areas needing attention. Often, there are a multitude of simple adjustments entrepreneurs need to apply to enhance the prospects of a successful deal. For smaller businesses, these adjustments might involve addressing VAT liabilities, ensuring clean tax records, or reforming the dividend payment method.
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In addition, various processes such as the regularity of account preparation, forecasting methods, and the systems utilised should be examined and, if necessary, refined. Investing in these areas may be necessary to guarantee that the business garners the value it genuinely deserves.
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Potential buyers must be convinced that the business they're considering purchasing can operate efficiently and presents credible growth potential. Essentially, the aim is to dispel all uncertainties from the buyer's mind, thereby increasing the chances of a successful transaction.
Start Meeting And Building Your Team Of Advisers
Before commencing a business exit, it's essential for entrepreneurs to understand the array of advisers they'll need during the sale process. Drawing from good practice and experience, entrepreneurs often acknowledge the necessity of advice, but might not fully appreciate who can bring the utmost value when it's time to sell. They may underestimate the significant role professionals can play at deal time.
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It's best practice to introduce advisers early in the process, as this allows plenty of time for you to establish a meaningful rapport. Often, entrepreneurs might wait until just a few months before a sale to bring advisers onboard. However, this is generally too late, as preparing a business for sale is typically a matter of years, not months.
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Advisers can provide invaluable assistance in shaping your business and conveying its narrative to prospective buyers. While the reputation and experience of advisers are fundamental considerations, the chemistry and trust between you and your advisers are equally crucial. In the high-stakes, intense environment of a deal, these personal connections can make a considerable difference and should be a significant factor when choosing your team.
Be Prepared to Adjust Your Exit Timescales And Be Patient
It's good practice to stay flexible with your exit timescales rather than hastily adjust the sale price or deal terms. Patience is key in this process, not only to ensure you garner the best value from the deal, but also to establish yourself as a credible seller. Being prepared to fine-tune your exit timeline, while maintaining patience, can significantly influence the success of your business sale.
Your Management Team Holds The Key To Your Business Exit
A good management team will let you walk away even if you don’t want to sell straightaway.
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The success of your business exit largely rests on your management team. A strong management team allows you the freedom to step away, even if you're not immediately looking to sell.
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In order to effectively sell a business, it's imperative to have leaders or managers who embody the passion and vision for what you're selling. These attributes can make all the difference. With the right leadership, everything else falls into place. Conversely, the wrong leadership, especially in a smaller company, can alter the culture and energy significantly. When the time comes to sit before a potential buyer, any inadequacies in leadership will be exposed.
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Having the right management team in place is like a well-oiled machine; everything else runs smoothly. As you grow your business, bringing in managers to support this growth is necessary, but be prepared to rejuvenate your team before you sell. It's crucial that your leadership reflects the ethos of the company and its future aspirations.
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Get the right management team in place and everything else flows