If you ask yourself this question now, what would the answer be?
Put yourself in a buyer’s shoes, someone who is looking to purchase a business, and ask what that person would most likely be looking for. Are they seeking a struggling business that they can turn around, or is it more likely they are looking for a sound business with a good track record and good prospects? While they may be looking for the former, this is probably because they want a bargain which they believe they can fix. Most likely however, they are looking for the latter and are prepared to pay a premium for it.
Now ask yourself which business would you prefer to be selling – a knockdown “bargain” or a great business with a proven track record and good prospects? The point is that at some time in the future you will be in the position of seller and you will have to confront this situation. At the time you sell, your business will be a reflection of the things you have done in the past – the things you are doing now, or can start doing now, and continue to do right up until the time you sell.
So what are these things that are likely to add to the value to your business? Most buyers are seeking a level of certainty to generate future cashflow. This means they will ask questions like “How consistent and predictable have past revenues, profits and cash flows been? What reputation does the business have? What evidence is there of future revenues, how good are the management and staff and can the business operate without its owner?
There is whole range of stuff that is likely to convince them. This includes:
A documented strategy for the future
Business plans that have been achieved
Accurate financial records including budgets and clearly understood relationships between cost, revenues and profits
Structured and documented processes that staff can follow and that promote efficient practices
A history of sound profit and good cashflow
An order book with a pipeline of customers and/or repeat customers who return again and again because they are happy with your products or services.
An ability to operate with minimal input from you, the current owner
These are some of the things but there are others and the point is that they can’t be created overnight. Building a robust and healthy business takes time but by undertaking a process of continuous improvement throughout the period you own your business you can achieve it in a less stressful and more sustainable way than if you try to improve it in the two or three years before you sell.
Most importantly however, is that the reason why buyers are looking for all these things is that they are the hallmarks of a profitable and successful business – one that is making good money, has good cashflow and is easier to manage. Wouldn’t it be great if you could do this throughout the time you own your business rather than in the short time before your sell?
Here are three things you could do to get you thinking about the value of your business and whether you are on track to reap the rewards of eventual sale:
Score yourself one to ten on each of the bullet points above. Where would you like to be? Where are the gaps? What could you do to fix them?
growth and profit diagnostic
to pinpoint your biggest opportunities for improvement, and
If you don’t like the results or are unsure how to proceed, seek advice from
someone who can help
. This could be one of the best investments you ever make.