Take actions to enhance the attractiveness of your business
Different buyers will view your business differently, depending on how your company would help them to achieve their strategic goals. You may find it hard to second guess what a prospective buyer would intend to do strategically with your company. It is wise to take early advice on how your business would be viewed by prospective buyers. However, there are a number of factors which will always enhance the quality of your company in the eyes of any buyer, whatever their strategic intentions:
Reducing reliance on the retiring shareholders.
Following a sale, most buyers request a short handover period from the vendors. However it is important to be able to demonstrate that the business will continue to run profitably without the current owner involved. Areas such as key customer or supplier relationships, technical knowledge, new product development and management involvement in day to day operations are often areas where it is important to demonstrate the business is not overly reliant on the retiring shareholders.
Concentration and quality of the customer base.
When buyers are making acquisitions they are looking for some certainty that the company will continue to generate a similar or increased level of profits for the foreseeable future. The quality of the customer base will go a long way to providing assurance that the company will continue to generate profits. Buyers will view a company as higher risk where a substantial proportion of the sales are with one or two key customers. Buyers will also look at the types of customers, their financial standing, how long they have been customers and the levels of repeat business to form a view on the quality of the customer base.
Quality of your management team.
Most buyers will expect your management team to continue to run the business after a sale and so will be interested in their skills, experience, qualifications and how well they work as a team. If there are any gaps in the skill set, or gaps will be created by you and any other shareholders retiring, it is important to make plans to fill those sooner rather than later.
Barriers to entry for competitors.
Buyers will be looking to acquire a company such as yours because they have made a strategic decision that the best way to grow is by acquisition rather than organically. Whatever their reason for choosing to grow by acquisition, it is important to be able to assure them of your position in the market, by protecting your brand through trademarks and any products and other intellectual capital with patents.
We have teamed up with experienced business coaches to offer a service to company owners who are starting to plan their eventual exit from their business.
Coaching is taken for granted by top sports people – it can also play an important part in getting a business ready for sale.
Eventual exit may still be some years away, but there is every reason to start to think about, and plan towards, your exit sooner rather than later.