Improving Business Performance
Grooming a business for sale is not about applying a lick of fresh paint or tidying up the warehouse. Grooming a business is about putting new organisational structures and procedures in place and improving business performance over a number of years prior to sale.Grooming a Business for sale
You must be able to defend the value you put on a business and this is done by putting your financial records in good order. However it is not just figures that sell a business – presenting a well organised business is equally important.
8 Key Grooming Steps
1. Timing – you should start to groom your business years in advance of a sale. A minimum of two years is recommended.
2. Business Goals and Strategy – If you have not already done so, develop and implement a comprehensive business plan. It will give a buyer confidence that the business has been well managed and he/she will see a vision of a profitable future that is worth paying extra for.
3. Management Structure and Procedures – A business that cannot run without your presence is of little value. Put a management team in place, specify their roles and responsibilities clearly and train them properly. Develop and document important procedures, set out clear policies (on credit control, inventory etc) and delegate to your team.
4. Be able to demonstrate solid financial performance – Ensure your financial records are in good order; produce financial statements at least quarterly and retain records for at least three years; ideally budgets and forecasts should be prepared.
5. Manage your financial results – Many businesses are managed to minimise tax by minimising reported profits. However businesses are often valued on a multiple of profits. Be willing to pay more tax in the short term – you will get it back many times over in the valuation multiple when you sell.
6. Manage operations more effectively – Cut costs by renegotiating supply contracts; eliminate unnecessary perks; reduce stock levels; tighten credit control etc.
7. Secure your assets – Repair and maintain physical assets; remove any personal assets not for sale. Nowadays much of a company’s value lies in intangible assets – brand name, intellectual property (copyrights, trademarks, patents), proprietary products. Assert ownership over and protect your intangible assets.
8. Reduce the risk – Buyers are always worried about hidden dangers. Put formal contracts in place with customers and suppliers. Ensure the business is fully compliant (Company law and taxes; Health and Safety; COSHH; HACCP etc). Reduce over- dependence on a small number of customers or suppliers; secure key employees with contracts of employment and incentives; settle disputes and sort out the pension fund.
An Exit Strategy
Staff at FBSA can carry out an audit of your business looking at it from the perspective of a potential buyer. We can highlight the weaknesses in your business and develop with you an Exit Strategy Plan, which sets out the key actions to be taken over a period to make the business more attractive to potential buyers. We can then help you implement the plan so that you will achieve the maximum value when you come to sell your business.