Every business owner should be concerned about whether they will be able to sell their business for a good return when they’re ready to put it up for sale. When the day comes for them to sell, there will be one big question on their minds – will they get the price they want for the business? So how can you ensure that your business is an Asset of Value? Only 5.4% of businesses are successfully sold, while 94.6% just close down when the time comes. No matter how invested you are, eventually you may want to move on to something else. Building your business into an Asset of Value means investing the time to strategise and, importantly, to implement the strategy. In other words, make sure that you work “on” your business and not just “in” it.
Timing is everything
To ensure you get the best price for your business, and that you are rewarded for all the hard work and investment you put into it, start by asking yourself if you are really ready to put it on sale? Are your financial records in order? Is your customer base solid and are your business systems robust? It might take a couple of years of preparation before your business is in the best position to be sold. Choosing the right time is tricky – if the business is in decline, it will not be attractive to buyers, but it will also probably be hard for your to walk away for the business if it is growing strongly. Getting a good valuation will depend on the market and the industry conditions, but mostly it will come down to whether your business is an Asset of Value.
Solving problems for customers
Consider what your business looks like from an outsider’s perspective. A prospective buyer will first ask whether your value proposition is viable. You can easily judge this by asking: “Does my business solve customer problems?” A business that provides a unique product or service and that solves a problem for a significant customer segment, has scope for growth and is an attractive investment opportunity.
Put systems in place
Someone who values your business and wants to bargain for a lower price, will ask if it is viable without you, the business owner. Ensure that your business can run without you by building systems of delivery. Once you have established systems, it is much easier to employ people, not to do a job, but to operate the systems that you have built. The systems must allow you to extricate yourself from the day-to-day running of the business. Having the right system in place will mean that the business will be able to run without your ongoing and direct input. You should have systems to generate leads, sales to convert, operations to deliver, human resources to get the right people to do the right things, procurement to ensure the business is buying right, and finance to manage the flow of money in the business – all these systems should be stitched up and integrated to create a seamless customer experience .
When the time comes for you to sell up, will you have an understanding of the business outlook over the next few years? How will technology affect your industry? Will social, economic or other trends come into play? Are you prepared in terms of the people you will need on your team including accountant, appraiser, attorney and business broker, among others?
Sound like hard work? Aurik can partner with you to systematically build your business into an Asset of Value taking account of where the business currently is and where you want to take it. Find out more about building an Asset of Value.