According to Armstrong Watson's Family Business Insight Report released earlier in the year, more than a quarter of business owners are planning an exit within the next 5-10 years. If you are one of these, below are 5 top tips from our Corporate Finance team, designed to help maximise your business’ value to ensure that you realise the true value of your lifetime’s investment.
You are not your business
Can your business function without you? Investing in a reliable management team will ensure continuity upon your departure, making your business a more attractive proposition for a buyer. Carefully considered candidates from your management team may even provide a favourable exit strategy, with Vendor Initiated Management Buy Outs (VIMBOs) offering business owners a highly flexible, tax efficient alternative to the traditional trade disposal.
Consistency is key
Is your revenue consistent, or do you rely on infrequent big wins? Volatility in revenue poses a risk to a purchaser and this will be reflected in the price they are willing to pay. By developing customer relationships and establishing recurring work, you can demonstrate your business’ sustainability. Where applicable, service plans and memberships are practical ways to introduce monthly revenue streams into your business, whilst improving cash flows.
Don’t depend, diversify
A business that is dependent on a large contract, whether that is for a customer or supplier, is likely to be less attractive to a purchaser. Broadening your business’ customer base and building working relationships with a variety of suppliers will dilute the commercial risk your business will face. Although securing long term contracts with customers may necessitate a discount at times, the lost revenue is likely to be offset by the uplift in sale price of your business, given the security they provide to a new owner.
Maintain your records
Accurate valuations are underpinned by transparency, allowing purchasers to evaluate businesses with confidence. Maintaining your records reiterates your professionalism, reaffirms the control you have over your business and adds credibility to your verbal confirmations at the negotiating table. Moreover, it is likely to lead to an efficient sales process overall, with lead times on a purchaser’s due diligence being reduced significantly.
Clear vision
What is your business model? Potential buyers are turned off by businesses that lack focus; where comprehensive, credible market information is lacking and there is no unique selling point (USP). They also want to understand the way that your product or service is distinctive or superior to that of the competition and how any competitive advantage will be sustained. Therefore, having a clearly written strategy and business plan could help potential buyers understand the business better and justify the right value for you.
We can help you put yourself in the buyer’s shoes and pre-empt the questions they may ask so that when it is time to sell, you receive the best possible price for your investment.
For more information or advice abou thow to maximise your business' value, get in touch with Chris
