The likelihood is that unless you are running a ‘life style’ company, the objective of yourself and any corporate backers will be the ultimate sale of the company. If you have been reading some to the previous sections of the document, you will have seen that everything you do is ultimately leading up to that point. So what are some of the things that you should be doing to prepare for your company for a sale?
Identify potential buyers – Start courting them early on, not with respect to them buying your business, but try find creative ways of them getting to know you and your business. Build up a knowledge base of their business.
Generate good news about the company –Make announcements about orders that you have won, publish success stories about your company and generally build up the profile of the company within the markets you are in, and make sure that your potential buyers get to hear about it.
Reduce dependency on yourself – If you are working 18 hours a day and the company falls over every time you take a holiday, then it is not ready for sale. It shows that you have not built up a competent management team below you that can run the business when you are not there. A potential buyer will not want you around for long after the sale, if the business is highly dependant on you, it will be worth a lot less.
Remove all skeletons from the cupboard – All companies have them, tax issues, contracts that have on-going legislative claims. All these things will frighten off a potential buyer. There is no point in hiding them, hoping that they will not be discovered, they will be, so get rid of them now.
Demonstrate an ability to meet targets – If you have consistently failed to meet your targets in the past, you are going to have a hard job convincing a potential buyer that you will meet them in the future. So think about that very early on when you are setting your targets, it is better to show that you are exceeding less ambitious targets.
Demonstrate good control over the balance sheet – I mentioned in a previous section “learn to love your balance sheet” that means being able to demonstrate good control of all the elements that influence your balance sheet, obviously profit generation, but also debtors, creditors, purchasers, stock. The final amount you obtain for the company is likely to depend upon your ability to achieve a particular balance sheet position on the day of completion.
Establish good management systems – Be able to generate management accounts at least within 2-3 weeks of the end of each month. Establish ‘Key Performance Indicators’ for your business and be able to demonstrate actual performance against the targets set for those indicators.
Have simple corporate structures – A potential buyer is not going to want to unravel a web of subsidiaries and holding companies in exotic places around the world. They will get suspicious and walk away, so keep your corporate structures simple and above board.
The best time to sell a business is when you don’t need to or don’t want to, but if the company is ready and prepared the buyers will come to you and that is when you can ensure that you will get the best offer.
Next up… negotiating the sale