Getting a business ready for sale
Once a business owner decides to sell their business, there is quite a list of things to do to ensure the best outcome. Things such as getting the accounts in a presentable fashion,preparing proper inventory and asset lists and tidying up legals are the obvious.
For the best outcome, what about preparing the business in a way that maximises the value of both the vendor and buyer?
The actual method used to sell the business – broker, trade sale or staff/management buy-out is not the issue. The key is how to:
- articulate a strategy and plan for the business,
- build a road map to get there, and
- measure progress against the plan in a regular, fact-based, way.
When a carefully thought through process acted on, and progress against a goal are measured, behaviour within the company will usually change in a positive way. If an incentive scheme is added to this, along with a method of capturing new improvement opportunities, and rewarding the positive behaviour, then a “virtuous circle” or “innovation circle” actions, will become part of the company culture.
When new processes embedded, Standard Operating Procedures (SOP) will change and need to be recorded. The process of recording and holding staff to account for the processes will reduce key man risk, a major factor for someone wanting to buy a business.
The timing to put such a process varies, but often it is best to plan for a timescale of around 18 months to carry out a process that will optimise the business for sale.
If this process is put in place, then the price for the company should rise for two main reasons:
1. Revenue enhancement and cost saving projects will result from properly planned, incentivised, and implemented projects. This raises the demonstrable ongoing profitability of the company. This will mean that the base earnings for a P/E calculation of value will increase.
2. The fact based reporting process records and manages actual progress against a plan. That gives excellent visibility into the company and its performance. This visibility decreases the risk a buyer would otherwise percieve, and reducing risk usually means increasing price – in this case through the multiple of earnings a buyer is prepared to pay.
In a nutshell this is the process that Oncore implements for clients wanting to maximise the value of their business.
Thinking about selling your business? Contact us for a free interview at firstname.lastname@example.org.