How do you maximize the sales price of your business? 

With the end of COVID lockdown, hopefully, we are getting back to some sort of normality. Some business owners will have taken the opportunity during locked out to review their future business strategy.  One are to consider would be how to maximize the business sales price.

They will have decided, in the light of the time for reflection during lockdown, that they do not want to carry on with what they were doing prior to lockdown.  They will therefore be looking to sell their businesses. Another set of business owners will be looking to take the opportunity to grow by acquisition. They will have a plan to selling their enhanced business in 5 to 10 years when it has reached its maximum value. 

Many business owners will consider a sale within a period of three to five years’ time. But this often will have to be extended since the sales value cannot been
maximized during that time frame. So how do you get the best price for your business?

So how do you get the best sales price for your business?

Planning Time

The most important consideration is the planning time and the work done during the time immediately prior to sale. I was speaking with an associate last year and he told me of a company that was well run had very good cash flow and was in a niche market. The business owner decided when he was 65 that he would sell. Since he had decided that he would sell the business immediately this put him in a buyer’s market rather than a sellers’ market.

He therefore he received a much lower price for his business then he would have done if he had decided to sell a few years earlier and taken the time to find a buyer without the pressure to sell immediately.

The business itself as it was in a niche market and so lend itself to an MBO. This was the obvious solution to the owner desire to sell. He would have been able to have undertaken a management buyout over a period of three to five years. This would have rewarded his management team who had successfully run the business with him over a number of years.

He could then have transferred chunks of equity over a period of time whilst remaining part of a business and thereby providing reassurance to customers and ensuring that the business was handed over in good order and maximizing the value that he obtained for his business and all of the time he had spent building it up. So moral of the story is too accept your own mortality and plan for your exit as early as possible.

What you are selling or what the buyer is buying.

There are a number of companies who seek seeking to grow by acquisition. We see this most clearly in the American market where the tech companies spend billions buying a new niche player.

Microsoft spends billions buying up accounting software businesses about 30 years ago and I thought Nokia in order to get into the mobile phone market and also bought Skype to get into the video communication market. The reason for doing this is that a number of large companies are not very good at innovation.

Therefore they substitute innovation by acquisition of businesses that have reached a significant size. If you are in a niche market there will be business’ who will want to buy you to add to their existing portfolio of products and services. They will often then pay a premium for your business.

So it’s important to identify who are your potential acquirers, why they might wish to acquire you and if they are in reality only buying your products and your sales. In this instance maximizing your customers yes before you sell the business even if you are then making losses perversely will increase the sales price of your business.

Function without the owner & CEO

Too many businesses are set up in such a way that they do not and will not survive without current business owner. In this situation you probably don’t own a business but you own a job. A business can be sold whereas a job cannot.

It is therefore important to ensure that the business is structured with a suitable management team who can operate the business in the absence of the owner. It is important in this section to ensure that you have created a business structure with clear business processes so that your employees can follow them, ensuring that the sales process generates new customers, the delivery process delivers what the customers want and are thereby retained and that new products and services are innovated.  

These areas need to the independent of the CEO and to be able to function without him or with somebody else without the detailed knowledge of the business. In fact, these areas need to be person agnostic. It is very important to be person agnostic since this will prove that you have a business that is fully independent of yourself and can be sold for maximum value.

If you are thinking about selling your business or you want to grow by acquisition then I would love to talk to you about how to succeed with this process. It can be quite fraught and challenging and having a team around you who have experience of building businesses and the pitfalls involved will ensure that you are successful in your endeavours.

With the end of COVID lockdown, hopefully, we are getting back to some sort of normality. Some business owners will have taken the opportunity during locked out to review their future business strategy. They will have decided, in the light of the time for reflection during lockdown, that they do not want to carry on with what
they were doing prior to lockdown. They will therefore be looking to sell their businesses. Another set of business owners will be looking to take the opportunity to grow by acquisition. They will have a plan to selling their enhanced business in 5 to 10 years when it has reached its maximum value. 

Many business owners will consider a sale within a period of three to five years’ time. But this often will have to be extended since the sales value cannot been
maximized during that time frame. So how do you get the best price for your business?