There is a great deal of pride in being a business owner, and having something built on hard work and expertise over years or even decades. You and your clients may have clear goals for your firms that you’ve continuously worked towards, but when it comes time to exit the business and sell up, it might not feel as straightforward.
When assessing a potential sale, you and your clients are likely to want your respective businesses to be as valuable as possible in the eyes of interested buyers. This could be achieved by taking a few simple and useful steps.
Read on to discover five steps you and your clients can take to potentially drive up their respective values before any potential sale.
Step 1 — Get the company appraised and ensure accounts are in order and up to date
A good starting point when looking to sell a business is to seek out an external appraiser to assess the business in its current state.
This step provides an understanding of the firm’s current valuation and can align any expectations from a potential sale accordingly.
Once the business has received an independent valuation, and potentially also had a follow-up second or third opinion from further experts, you or your clients will likely be in a position to form a well-informed plan to maximise the value of the business.
Before making any improvements, it is important to make sure the “house is in order” and review any essential paperwork.
It’s a sign of a well-run business to potential investors if they can come in and review easily accessible, clearly laid-out company records.
It is vital to ensure the business has:
- A simple and easily digestible record of all its income and expenditure, and any supporting paperwork
- Employee records
- Contracts for key customers and essential suppliers
- Documentation that might help someone new to the business quickly get up to speed.
If a business has these checks and balances already in place it can inspire confidence in potential buyers, boost the value of the business in their eyes, and rapidly progress the timeline of a sale.
Step 2 — Optimise cashflow and maximise margins
An accounting system can be used to highlight to buyers how a business is run tax-efficiently. It can also be used to highlight consistent revenues and growth, which can help investors forecast the business’s future.
It is important to clearly show potential buyers that the business is operating in a profitable manner with a reservoir of cash reserves to rely on, stable margins, and a consistent cash flow to help continually grow the business.
One way to optimise cash flow is to eliminate any existing inefficiencies or potential problems. Reducing unnecessary costs within the business can quickly boost margins.
Positive cash flow and reserves are crucial to showing a business is stable. Although, it is important to not mistake cash flow for revenue.
Potential buyers are likely to want to see actual cash on the books, as it is a solid sign of growth and security. Healthy revenues can seem positive at first glance, but if the business has significantly high outgoings, the firm might not actually be operating as profitably as initially presented.
Step 3 — Retain talent and strengthen the existing management team
Talented and experienced staff have never been as valuable as they are in the current market. Retaining staff can help smooth any transition period for new owners.
It is a huge benefit to the business if any management that will be retained post-sale have an understanding of the business inside out. This can help maintain key systems and processes throughout any transitional period.
A recruitment drive can be stressful for any business owner and is unlikely to be something a potential buyer will want to embark on shortly after acquiring the business.
Remember: workforce stability is a reassuring sign for potential buyers.
Step 4 — Build “the brand” by developing positive relationships with other businesses and grow the existing customer base
The value of a business can be quickly boosted by proof of successful professional relationships and a solid existing customer base. It can show buyers that the business has clear markets and networks to tap into and that the firm’s reputation is in a good place.
Developing a positive reputation can be time-consuming and comes with an array of challenges to overcome. So, being held in good standing prior to a sale can help reassure buyers that they’re making the right decision and reduce any concerns about needing to fund a marketing drive.
Your clients’ businesses might benefit from receiving professional advice to help them get their firms on track for a sale and ensure they have a stable customer base in place.
Your own business can thrive as a direct result of your clients’ good fortunes. The more funds they have available, the greater the size of their business and the more they’re likely to spend on essential protection, which can boost your brokerage’s bottom line.
Step 5 — Seek out external advice and develop a long-term written business plan
Finally, don’t try and go it alone. You and your clients are likely to benefit from third-party advice and help in developing a long-term written business plan to better pitch your firm to potential buyers.
It is likely to be a smart move to consult a range of experts who might be able to provide their own unique thoughts and contributions towards improving the state of the business, which may end up maximising its value before any eventual sale.
Get in touch
If you or your clients are considering potentially exiting your respective businesses, it is important to seek out professional advice. Before making any major decisions, reach out by email at info@grey-parrot.co.uk or call us at 02039 871782.
Please note
This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
Production
