6.5 minute read
The M&A market continues to go from strength to strength. Trade buyers need to make acquisitions to shift their business models and create scale and private capital is looking for the yields that smaller businesses can provide. Valuations are holding and if you are planning to sell your business, the following revisited ten proactive steps can further maximise your company’s value:
1. Stand out from the crowd
If you cannot be differentiated from your competitors, your business will not stand out and buyers will have a choice, which will drive down your value. If you have a specialism within a niche sector, you create barriers to entry and generate a ‘we want, we need’ motivation. This is when buyers are forced to acquire you to ensure market share and/or market entry into new ‘blue oceans’, thereby creating and capturing uncontested market space, making the competition less relevant and boosting margins.
2. Create a resilient business model
The pandemic threw many sectors into turmoil whilst others have sailed through. Reinventing yourself cannot change your industry, but you can learn from past experience and reposition your business to better counter future challenges. Targeting clients in resilient sectors, embracing remote and online ways of meeting customer needs, and working with suppliers to create more robust and alternative supply chains will all help to build future resilience.
3. Put data first
Volatility increases risk but this can be offset with information. No matter how great your service, or how excellent your reputation is, when it comes to selling your business, buyers are looking for future growth and yield The more you can prove this with the right research, information, realistic forecasts and credible information, the more buyers will be prepared to pay premium values. A virtual data room is a must, and this should be professionally presented to showcase the business.
4. Demonstrate your productivity
Being able to show that you can sustainably produce more than your competitors per headcount will put you in the upper quartile of your sector and this quality will command buyers’ attention in bids.
5. Put technology at the hub, not the spoke
Today, every business has become technology-driven and its effective use underpins your company’s competitive advantage. Now in the process of selling your business, we are increasingly witnessing that the due diligence is expanding to assess a company’s digital capabilities, strengths and weaknesses – from customer interfaces, sales, finance, Enterprise Resource Planning (ERP), manufacturing, and Human Resource (HR) applications. Are these leveraged, integrated and ahead, or are you trailing the market? The pandemic has accelerated the virtual age and digital capability is increasingly becoming a good value influencer.
6. Measuring recurring performance in real-time
The old sales model of using three years’ historic profit to value businesses is a thing of the past. Since Covid, valuations are about now and tomorrow – looking at current performance and the credible work-in-progress to build future forecasts. Creating dashboards and key performance indicators such as the cost per acquisition of clients, lifetime values, and immediate real performance run rates are key in this assessment. Recurring revenue is also important – so even if you do not have contracts, being able to demonstrate high levels of repeat trade will push up the value, particularly if it is well spread between customers.
7. Aim to break through the glass ceiling
Business models are rapidly changing – companies ahead of market demand with customers in pull (they seek you as much as you seek them), always command higher valuations. Therefore, knowing how to position your business ahead of the competition is an important value driver. Buyers and investors do not like glass ceilings, they want a company that has ample headroom, capacity and demand to secure future growth.
8. Your people are important to sell your business
Buyers and investors want growth, and your teams ultimately deliver this – whatever your business model or track record. If you are the key driver of the business, investors will view this as a high risk, but if they can see that the business is driven by a quality team then this risk diminishes. In addition to being competent, your team needs to demonstrate that they can both drive growth and stretch their capabilities going forward. This will require extraordinary investment in training and development.
9. Partnering with the right professional team
Selling your business might be the largest transaction you undertake and having the right approach can make a fundamental difference in terms of its success and financial realisation. Positioning and preparation of how the process is managed to create an auction are important and because transactions are technical, appointing a quality advisor who understands you, your sector and the technicalities, is a key-value driver when selling your business.
10. Contact Avondale Corporate
Avondale is a leading business advisor that helps ambitious owners buy or sell companies, secure investment, grow their business and enhance shareholder value. If you’re thinking about selling your business or looking for investment, why don’t you give us a call for an exploratory discussion without obligation on +44 (0)20 7788 8250, view our Contact Us page or email us at firstname.lastname@example.org for further information.
Alternatively, you are invited to join our next discussion by registering for our webinar “How to Build A More Valuable and Sustainable Business” on 9th December 2021 here.