Buyers and investors have remained highly active despite the market volatility, but how can you best prepare your business for sale to drive the “we need, we want” motivation in buyers in a market where quality pays?
1. Fail to plan, plan to fail
This may be just a saying, but its essence is central to preparing your business for sale and/or securing investment. Volatility increases risk but can be reduced with good information and preparation. No matter how great your service, or how excellent your reputation is, when it comes to preparing your business for sale, buyers are looking for future growth and yield.
The more you can prove this with the right research, realistic forecasts, and credible information, the more buyers will be prepared to pay premium values. Risk downgrades value and we recommend a dry-run due diligence process where you bench-test and score every metric of your business through a buyer’s eyes. We offer a Business Sale Preparation consultancy service that can support you in this if you do not have time. By careful planning, you can create the right strategy that is understood and implemented by your team well in advance.
So what can you do to offset or remove risks to prepare your business for sale?
2. 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 build repeat revenue which reduces risk. This is when buyers feel compelled to acquire you to capture uncontested market space, making the competition less relevant and boosting margins.
How can you create more recurring revenue and pull in the marketplace?
3. Business model
Yesterday is in the past – it is tomorrow that buyers are focused on. Many businesses have irrelevant legacies in their set-up and therefore fail to be lean or secure the best margin. However, it can be hard if you built that past to establish what works in your business model and what does not. Today, every business has become technology-driven, and its effective use underpins your company’s business model and creates further opportunities to automate.
An objective review can help you to identify where the best efficiencies are, which customers lose your money, and where your team structure could be streamlined. The objective is to drive costs down whilst freeing time up to focus on the areas where you can really add value. 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.
How can you streamline your organisational structure to prepare your business for sale?
4. Be team driven
Buyers and investors want growth, and your teams 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 and you need to demonstrate that you can hold them accountable for this.
Where can you invest in training and development, and create clearer roles and responsibilities?
5. Get help
A DIY approach to preparing your business for sale is ineffective. It’s hard to be objective and, if this is your first sale or fundraiser, it is difficult to understand what buyers think. Expert advice and experience result in a faster and more effective process. It also enables you to concentrate on the changes you need to make, rather than the preparation strategy.
Selling your business might be the largest transaction you ever undertake and having the right approach can make a fundamental difference in terms of its success. Fee investment in preparing your business for sale and its strategy is an add-back for buyers so does not affect your EBITDA in sale negotiations. It will easily cover its cost in reducing negotiation on risk and ensuring that you have the right position to create the “we want, we need” buyer motivation.
Who can best help you to prepare so you can get on with the day job?
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 give us a call for an exploratory discussion without obligation at +44 (0)20 7788 8250 or email us at av@avondale.co.uk for further information. Alternatively, you are invited to join our next webinar “How to Buy Right” on 8th June 2023 by registering here.
