To Create a Saleable Business

For a business owner there are three things in life that are certain; death, taxes and exiting your business.  

Exiting and extracting the maximum value for your business is much more involved than just resigning, picking up your gold watch and moving to the beach!.

If you are relying on the sale of the business to be your retirement nest egg then you will want to extract the maximum value. After-all you have probably spent years in the business building long-term customer relationships and good products or services. These things all have value.

The good news is that with some small investment and structural changes you can significantly enhance that value.

Unfortunately most owners are blissfully unaware of what potential buyers value in a company and let it go to the highest bidder. Like anything it must be prepared and marketed properly.

The physical act of leaving the business must be planned for and managed. Setting a date is the critical first step: a date equals commitment! Once you know you want to be out by the 31 st of December 2010, everything else works towards that.   If it’s “sometime in the next 10 years” the date just keeps rolling out.

There are two key elements in business saleability and they are both closely linked: 

1. Who is likely to buy the business?

Basic elements of competition apply here: the larger the pool of people who are able and willing to buy your business, the more you are likely to get for it. Some owners say they will sell to their competitors, as they “know what its worth”. But how much will they pay if they are the only bidders? Similarly, how much would anyone pay for a business where the owner is the only reason customers go there?

The deeper the prospect pool, the better.

2. How much will the business be worth?

There are many formulae for calculating the value of a business, but they all hinge on how much someone will pay for it: the market rules ! So the more options you have for buyers, the higher the price is likely to be. Relying on one, be it competitors, staff or family, is likely to limit the appeal and therefore the price the business will return.

Measures such as future earnings, brand strength, distribution, and stability of markets and the workforce are all important to varying degrees. The best way to improve value, however, as well as improving the chances of sale, is to reduce the dependency of the business on the owner.

Preparing your business for sale, then, means making it easy to run. A prospective buyer wants to see processes and systems, not only for all the difficult technical aspects, but even for simple everyday tasks. They want to see plans for how the business is marketed, as proof of likely future earnings. They will want to see well managed and motivated staff. And, most importantly, they want to know that as the new owner they will not have to be tied to the business at all times.

These things do not happen by chance, and it is never too soon to start planning. The only question for any business owner is: are you going to leave on your own terms or have the process dictated to you by events beyond your control?

If you need any further advise feel free to call and discuss with one of our specialist advisers - click here

Action points - What to do next

© 2008 - 2010 Progressive Business Solutions. Powered by Web Genius
Page: Business advice: Create a saleable business - Last Updated: 10th December, 2009 | Site Map | Links