When it comes to business, have the end in mind.
It is intrinsically human to never think about ‘the end’.
It is intrinsically human to never think about ‘the end’. Ever since our caveman days we have been programmed to focus on survival, our ancestors did not have the luxury of having their basic needs attended to, for them each day was focused on survival and not dying.
This survivalist approach has stayed with us to this very day, and in business it can be our greatest weakness. We simply do not think about ‘the end’.
You have a company, maybe you are fortunate to own a few, perhaps you have an investment property or a portfolio of commercial assets. That’s great, over the years you have done everything in your power to keep your business assets ‘alive’ and have provided them with the nourishment and attention they need in order to grow and thrive.
What is your plan?
Will you own your company until the end of time?
Of course not, that would be unrealistic, but what is your exit strategy?
We believe that every business should be started with the end in mind, most business people yield the highest paycheck when they sell their company. Yet, on a day to day level, we hardly consider the long term legacy of today’s decisions on the wellbeing and ultimate value of the business at our exit date.
Like a bride before a wedding day, you should groom your business for sale. A sale of one of your biggest assets should be a considered decision and steps should be implemented well in advance of the intended sale date. Not doing this will mean that you will fail to extract the maximum value out of your business sale.
We have been fortunate to be involved with some of our clients from inception of the business all the way to a sale. What we have learnt is that the following main points will ensure that your business is sold for the best price possible;
Clean up your back office
Nothing says ‘run’ more to any investor than an unorganized back office. Everything should be filed and stored in an organised manner so that information is readily available
Ensure your tax and statutory compliance is exemplary
Like a judgment for an individual, a company’s inability to produce a tax clearance certificate will drive the risk to buyer up and will reduce the price offered. Invest in a good accounting team that will ensure that your submissions are accurate and your returns are up to date
Develop you own IP
Owner managed businesses have a distinct lack of information in a centralised location, start making lists of everything (clients, suppliers, service providers, service level agreements, price lists).
Register any trademarks or patents
If you deal with any intangible property, register it with a suitably qualified attorney.
Sign agreements with all you service providers
Many owner managed businesses have informal relationships in place. Formalise these relationships with SLA’s (Service Level Agreements).
Analyse your customer base. Are you over reliant on a few customers, do you have credit policies in place, are your debtors current and collectable?
Formalise all your agreements with suppliers, analyse your procurement for areas of risk. Do you have a product that you can only obtain from 1 supplier? If so how strong and secure is you relationship? Best bet is to formalise it into a supply agreement or look for alternative sources
Ensure all your staff have complete HR files, which include contracts, leave records, increase letters and any other pertinent information
Is all your software licensed, do you have back ups in place? Our businesses run on IT – will your IT system and contingency plan ensure that you are operational within days after a major event?
Prove that the business does not need you
This is the most difficult one, your company will only have value to a buyer if it can function without you. Start empowering your staff and putting structures in place that allow your business to run if you are not there.
Selling a business is a lengthy and time consuming affair, in many instances where the buyer is a large company you will be faced with teams of lawyers and auditors. This can be a stressful time for the business owner.
Engage trusted providers to help you in this process, in many cases the additional value that professionals leverage out of the sale can more than repay the cost of these services, and it will save you a great deal in terms of time and stress!