Are you planning to sell your company? Preparation will be key to maximising the value of your business, and no time is too early to start planning for an exit.
Understanding the buyer’s perspective is a crucial step in this process. By putting yourself in the buyer’s shoes, you can anticipate their needs, concerns, and expectations. This insight will guide you in forming strategies to maximise the value of your business.
The better prepared you are, the stronger your negotiating position will be.
Can you highlight what makes your business unique?
Every business has unique selling points (USPs), but if you can’t clearly define yours, potential buyers won’t be able to either. A strong USP attracts customers and makes your business more valuable.
Your USPs should be a core part of your business strategy and clearly communicated to customers and buyers alike.
Maybe it’s that you have a leading industry response time, or you have a patented process, or your products are all ethically sourced.
It’s things like this that will get attention and increase the value of your company. If your USPs aren’t obvious, now is the time to sharpen them.
Get your finances in order
Consistent, growing profits make a business more attractive. If your company is loss-making, selling will be more challenging.
Exploring avenues to increase your profit margins could make a significant difference. This could include investing in additional marketing initiatives to attract more clients or negotiating better supplier contracts. There might also be cost savings that can be made to increase value, however consideration will need to be made as to what impact they might have on your revenue performance.
You will need to keep accurate financial records to reassure buyers that your business is stable.
A well-maintained financial record builds trust. Review your tax position and cash flow management regularly to optimise working capital and reduce unnecessary debts.
Creating plans to diversify your customer base could also make the transaction more appealing to buyers.
Expanding your income sources and securing long-term contracts where possible will reduce reliance on key customers, strengthening your business.
Eliminating inefficiencies, adopting new technologies, and staying ahead of market trends are additional routes to explore to improve your business’s value.
Make your business less dependent on you
Buyers want a business that can run without its current owner. If you are the key driver behind sales and customer relationships, this could be a high-risk issue.
If you have some customers that insist on only communicating with you rather than your wider team, buyers may worry they could lose customers or suppliers after you leave.
To prevent this from happening, build a strong team and delegate responsibilities to make the business self-sustaining.
Prepare a plan that covers the next three years
Having a clear business and financial plan for the next three years is always beneficial, especially when trying to secure a reasonable selling price.
Buyers will want to see realistic turnover projections, expected income, and planned expenditures. Providing evidence of a positive future for the business will give the buyer confidence that it is worth their investment.
Understanding business Key Performance Indicators (“KPIs”) and using these to justify future performance is a strong method of adding credibility to your projections.
Have you invested in your employees?
A highly skilled and motivated workforce is a big selling point for any business.
To attract buyers and increase the business’s value, invest in employee training, offer competitive benefits, and implement a positive workplace culture.
Buyers want confidence that the business will continue to grow after the sale.
Investing in leadership and development not only strengthens your team but also reassures buyers that the business has the talent and stability to sustain its growth. It may also be worth considering incentivising key members of the team using an Enterprise Management Incentive (EMI) scheme for example, to focus them on strong performance and growth.
Investment in your employees may also lead to having additional potential buyers when you are ready to sell, for example through a Management Buyout (MBO) or Employee Ownership Trust (EOT). If certain conditions are met, a sale to an EOT will eliminate capital gains tax for the seller.
Conclusion
Maximising the value of your business before selling takes careful planning and strategic improvements.
Several areas will require your attention as you prepare to put your business up for sale. Some of the key ones are operational efficiency, financial health, and long-term stability.
If you are looking for expert, tailored advice on maximising the value of your sale, contact our team.
