Selling a business. A higher value exit for business owners.
For many business owners selling your business is a once in a lifetime ride off into the sunset happy forever after the event, so you want to get it right, make informed decisions and maximise your chance of achieving your aspirational exit value.
Selling a business. It’s easy – right?
You build a business, work hard, slogging away for an unmentionable amount of years until your hair goes grey (mine is just starting in the edges); you build up a loyal client base and workforce, fabulous services and products. One morning you wake up and quite reasonably – you think “it’s time”.
You list the business with an agent who plonks it on the many many many SME’s companies for sale site, and you sit back and wait for the phone to ring with excited buyers, the deal to be done, the cash to arrive in the bank.
If only selling a business was that straightforward.
Many businesses are very disappointed with low ball offers, if any are received at all. Some brilliant companies I have met have even considered just closing their doors and just walking away because of lack of interest or low valuation based around bare bones assets on the balance sheet.
The harsh truth is there are too many SME companies for sale; most on first impressions are as unremarkable as the next, with too little in the way of stand out.
Selling a business. Your hidden fantastic.
There are many fantastic hidden businesses with some exceptional and valuable niche services and products.
Many organisations are unfairly seen as unremarkable because they are poorly presented or practically invisible in the marketplace, hidden in the noise of all the others. Potential purchasers remain ignorant of your value other than what they see in your accounts.
Selling a business. Start preparing early, really early.
You get out what you put in when selling a business, so it pays to plan ahead – especially when it comes to your exit strategy. Think way way way ahead, five years ahead of selling your business and plan.
If you are a startup, think about your exit from day one.
I encourage entrepreneurs to think about whom they could sell the business to from the first day they open their doors and use this as a driving philosophy.
This always for sale philosophy help you keep the business tight and form good KPI habits, plus you will be ready for the out of the blue offers, even when there is not a for sale sign on the business.
I believe that you should always be marketing the business, not just your potential customers but the market for your business.
I don’t care; get a business plan.
Write up a business plan, even when you don’t think you need a plan. “I don’t need a business plan!” Yes, you do. Investors don’t like ambiguity; they want as much certainty as possible a plan helps.
You will discover during this exercise that there are areas of the business, new products and services that you can embrace without too much effort. There will be trends you did not spot that you could embrace that will add strength to the business.
Sure, much of the business plan will be affirming what you already know, trust me on this; I hear the moaning groaning; I can see you rolling your eyes, “I am too busy”, but you will thank me for this.
You will find something virtuous. You will find something new and vital to fix, improve, or enhance that will make all the difference to the business.
If you don’t have the time to develop a business plan, we have a team that can help.
In negotiations, you will be able to talk with a stronger conviction about the businesses potential to buyers after scrutinising and looking outside in.
Now sort out your brand – properly.
“We have a good steady business, ignore our website, I know I know it’s embarrassingly crap, we have meant to sort it out for the last eight years, we don’t get any enquiries through it, we do much more than that anyhow, it’s a waste of time doing anything with it. One of the signage guys drew up a logo; we changed it on some of the vans, it different to the one on the reception wall. We ordered a load of workwear; the logo is different on that too. We print out a brochure internally and staple it together. Our competitors turn over five times as much as we do, yeah they are good at that social media thing, and I like their website, but their service is crap; it’s just BS. They did nick one of our clients recently; we are much cheaper. We do have a slogan. We care about our customers. The copy for the website written by a work experience graduate, we don’t do half that stuff, we get weird enquiries once in a while to fix washing machines – I don’t know why – we don’t fix washing machines.”
If you were looking cold to purchase as a business, how would you value this business? You need to take control and build your perception and be clear. Or the world will create its own perceptions.
Brand development takes time and has a dramatic impact on the fortunes of a company and its clarifies its perceived value.
The brand is the encapsulated essence of the business.
It also critical to the continuity of the business as a driving belief system without you being in the business; its the life of the business without you and your leadership.
Robust and committed brand development is also a great way to engage your team and strengthen their commitments and direction.
Staff do get concerned when a business is for sale; it creates a feeling of unease. You might have an exodus of your key team if the future is not defined.
You can present this strength to potential purchasers; in my experience – they love it.
Gather your evidence of greatness together.
Many businesses I see after digging in a little have fantastic unpublished client feedback, which is hidden by almost an act of self-sabotage.
Ask for testimonials, write nuanced case studies and present it all in a coherent and relevant way. These are diamonds and gold.
“Hey Dave, take a look at these guys; they are based in Birmingham; they would be great to roll into the group; they look super capable; check out the client testimonials?”
Go on the sales and marketing offensive.
Your business is a value by EBITDA and a multiple of this depending on the industry.
The more your business does, the more it is worth; the game is to pump up the business as much as possible before the sale a few years, publishing some consistent figures.
So, a strong marketing and sales strategy is required, which includes strong brand development and a comprehensive digital and social strategy – which is more than just a website and plonking a few things on Facebook. Set some sales targets too.
3 years of constant growth inspires confidence and the potential for a higher value in addition to actual turnover.
What if you could double your sales figures and net profit?
How would that affect your sale price and attractiveness to a potential purchaser?
There also might be a sweet spot of turnover for acquisition. A certain size that matters in the marketplace try and find out what that is. What do you need to do to gather to that sweet spot?
Put your accounts in order.
Making sure your financials are organised and accurate will instil confidence in potential buyers. They need to see a range of clear and accurate financial documentation, including:
- Historic turnover and profit figures
- Asset valuations
- Details of liabilities and debt
- Profit forecasts
- Busienss incorporation documents
- Leases and contracts
- Summary company reports
These are the first things that a purchase would want to see; it’s like the V5 and service history for a car.
Due diligence, tidy and put away.
You should check your contracts for any anomalies or uncertainties before you present your business to the market.
Staff employment contracts, supplier terms and conditions, and customer and legal contracts need to be reviewed for any outstanding issues or potential problems that could derail a potential sale.
You should also consider the intellectual property owned by your business and if it is registered and up to date. A crucial factor for any potential buyer is their right to use the trademarks and patents associated with their investment, something they’ll be sure to check.
Taking steps to increase the value of your business – whether significant changes are needed or only minor adjustments – will ultimately allow you to present an appealing and inviting business proposition to interested parties.
There are lots of ways to sell a business; structure depends on your individual requirements.
OK, what sort of help can I get?
This is just a summary of what to do; each business is unique in setting up circumstances, set up and objectives for the SME owner.
We are happy to discuss options for preparing for an exit.
We have a formidably experienced team including ex-chief executives of notable companies, Managing Directors, Operations Directors with a track record of business turnaround and improvements, practitioners of exits.
Oh yes, and we formidable strategic brand and marketing development team.
Expensive?
OK, it not a cheap exercise, but consider the uplift in sale, profit and the valuation multiple.
We have seen this endeavour add £ millions to a sale price of a business, creating a frenzy of competing companies wishing to acquire the polished and pumped up business entity.
The possibility of grants and funding.
Being an SME in specific sectors and regions, there are grants for various business improvements and our work. The application process is complex and has to be justified strategically.
We have been successful in securing hundreds of thousands of pounds in additional funding around a strategic growth plan.
