When a buyer starts looking at purchasing your business, they assess every aspect of your company to make sure it is optimized.
Your business is about more than just the numbers. Profit is important, but what are the other factors a buyer looks for in a business?
The way your business operates is key to its value. Most businesses do not consciously address the culture and behaviour in the business, yet it has a big impact on a buyer’s perception of the value. It shows up in how your team works together, what your processes are, and how the customer experiences your products and services.
How your business has behaved in the past has a significant impact on the way a buyer views risks associated with the company. This includes its relationships with statutory bodies like HMRC i.e., paying taxes on time, submitting statutory returns, etc.
If you are essential to your business and it can’t operate without you, that poses a major risk for an acquirer. Your customer and supplier contracts are scrutinized as part of the due diligence process to ensure continuity of revenue after the completion.
It goes with the territory that your financials come under the microscope. Buyers look for order and regular management accounts as well as your annual compliance of statutory requirements.
It’s Good Business
The legal structure of your company may make the sale process more difficult. Getting this in order is good business. If your company owns property, you may wish to decide whether you want to include it in a future sale of the company or if you want to keep the property to generate rental income.
In my first complex exit, a family-owned business had growth through acquisition over a period of 50 years. Starting out in construction, they extended into shipping, logistics, importing fruit and shipbuilding. It might have seemed a bit random, but each acquisition was a solution to a problem at the time. The way the business was collectively put together didn’t make a lot of sense.
It’s a bit like extending your house every year without planning permission or a plan for what it is going to be used for. The owners and directors spent 18 months getting the right legal structures in place to make it easier to sell to the right buyer. They knew exactly who the potential buyers were before they started the process.
Do you feel like you have no control or don’t understand your numbers? Discover how you can feel more in control of your business, make your business worth more AND make it easier and more fun to run. Click here to contact Christine by email alternatively, you can book a call with the Business Mentor of the Year 2020, author and speaker. Who helps business founders get their businesses in better shape so they can enjoy a happier, richer future. She saves them THOUSANDS and increases the value of their businesses by MILLIONS.
