Preparing your business for sale is a critical step in ensuring a smooth and successful transaction. Even if you are not actively looking to sell your business, being ‘sale ready’ is essential if you are looking to sell in the future as you never know when a buyer may approach. There are many areas to consider, but the key initial focus should include:
In volatile markets, risks can be high, but they are not insurmountable. Thorough planning to be “sale ready” is your ally in mitigating these risks. Beyond your current service quality and reputation, prospective buyers are interested in the future potential of your business. To demonstrate this potential, you should provide well-researched data, realistic forecasts, and reliable information. A dry-run due diligence process, where you evaluate your business from a buyer’s perspective, can help identify and mitigate potential issues.
Distinguish your business
Standing out from your competitors is important. Specialisation within a niche sector which creates entry barriers for competitors, generating recurring revenue, and reducing risk are factors that can make your business more attractive to prospective purchasers.
Check your numbers
Making sure that your financial records are organised and accurate will instil confidence in potential buyers. They need to see a range of clear and accurate financial information, including simplified company reports, historic turnover and profit figures, asset valuations, details of liabilities, debt and profit forecasts, VAT status, historic accounting policies, tax information, capital expenditure, working capital, holiday pay, accruals and deferred income.
These are all technical areas that buyers will love to dig into during due diligence so it’s essential to review your status and ensure compliance. Everything must align for you to be “sale-ready”. Additionally, it is also a good idea to see if management account accuracy can be improved as buyers are increasingly looking at real-time data to determine value. They are not investing in last year’s profits that have been spent, it is the current and future performance they are buying.
Buyers are interested in what your business can offer in the future. Many businesses have outdated structures that hinder efficiency and profitability. In today’s technology-driven era, the effective use of technology is essential. An objective review of your current technology can help you identify inefficiencies, unprofitable customer segments, and opportunities for streamlining your operations. The goal is to reduce costs, save time, and increase value by demonstrating that your business can outperform competitors with fewer resources.
Empower your team
Buyers and investors are keen on growth, which relies on your team’s performance. Relying solely on you or your shareholder leadership can increase perceived risk. Investing in your team’s training and development, clarifying roles and responsibilities, and fostering a culture of growth and adaptability can mitigate this risk and build trust and accountability.
Legal aspects can significantly impact the value of your business. Contracts, litigation, disputes, and licenses should be clear, ideally undisputed, and owned or amended and notified as necessary. You should ensure that your contracts meet best practices, are market-standard, and have liabilities capped where appropriate. Material changes of control notices, financial debentures, and personal guarantees should also be reviewed. In addition, you need to consider the status of statutory notices, ownership, EMI schemes, and disclosures to avoid potential red flags that may deter buyers.
Consider engaging the expertise of experienced professionals who can provide guidance on which areas of your business and sector that require your attention in preparation. Good advice on getting ” sale ready” is viewed as an add-back for potential buyers and will enhance your negotiation position.
Further Sale preparation articles can be found on our website including: Prepare Your Business for Sale – 5 Tps to Drive “We Need, We Want” and Negotiating the Sale of Your Business: 3 Key Rules for Success.
If you are interested in getting “sale ready” Contact Avondale Corporate
Avondale is a leading business advisor that helps ambitious owners buy or sell companies, secure investments, grow their businesses and enhance shareholder value. If you are thinking about selling your business or looking for investment and would like further information on how we can help you prepare your business for sale, please call us for an exploratory discussion without obligation at +44 (0)20 7788 8250 or email us at email@example.com for further information.