At CMC we have over 27 years of experience of helping business owners both build and then sell their businesses. So we understand what owners have to do to maximise their businesses value. I think there are some basic questions that every business owner should ask if you are selling your business.
5 key questions to ask when selling your business:
- Are you maximising profits? There’s no escaping the basic issue that businesses are sold for a multiple of profits. Therefore systematically examining all area of the business in order to maximise the profitability is a really important area. Remember the UK cycling team’s success at the London Olympics and the now famous quote; “ Getting the maximum profit from a business is much the same idea! See another CMC blog that gives some examples in this area – How to improve your businesses worth.
- Is your business well run? Do you have processes that a buyer can see that demonstrates that the business is well run and under control. As businesses grow they often outgrow the management process – areas that often need attention are management accounts, sales pipeline management, people processes, IT systems etc. What about the “company housekeeping”, are you up to date with your tax affairs, customer contracts and other bureaucracy?
- What is the role of the owner? If all of the business value is in the “owners head” then this isn’t much good when the business is sold. Of course the owner must direct and drive the business – but that doesn’t mean they have to do (or try to do) everything! Owners need to think about stepping back a little and let their key employees take responsibility in a controlled way – make sure your management processes (see point 2 above) are strong enough to allow this to happen. An area I spend a lot of time on with my clients is working out the best way to delegate some of the business management to their “second-in- command”. It is important to make sure that there’s enough controls in place to ensure the owner keeps in touch with all of the big issues.
- Do you have good quality sales revenue? To a large part, buyers are investing in your customer revenues. There are two particular things they value. Firstly a good spread of customers; focus on a single big customer is unlikely to help your value. Secondly, do you have recurring revenues such as maintenance or service contracts? Buyers will value strong ongoing customer relationships.
- Do you have an exit strategy? Preparing your business for sale is perhaps the most important thing you should consider when you are thinking of selling. Give yourself at least 2 to 3 years to get the business into the best possible shape. This will give you time to fix the things that need to be fixed and focuses the owner’s mind on the business itself, rather than the day to day hurly burly. It’s a well-worn cliché, but very true none the less that…. you need to spend time “on the business”, not just “in the business”. A previous blog of mine talks about why having an exit strategy is a very good idea, see Why have an exit strategy.
I’ve written a “white paper” that describes in more detail the issues to think about when selling your business – So you are thinking about selling your business.
It is a good idea to get help with the above, as an experienced and external perspective is absolutely essential. At CMC we’d be delighted to help – call me, Simon Scott on 07850 894998.