Planning to sell your business starts the day that you purchase the business.
The key to building a successful and saleable business is all in the planning. In this article we highlight the critical elements business owners should consider to maximise the most from their business now and into the future and answer the common questions that arise when it comes to selling up.
Planning is a continuous process and can be lead by your in-house team, however it is crucial that owners and executives remain impartial to avoid viewing the business through rose-coloured glasses. Impartiality will ensure that business owners do not miss key aspects and risks of their business strategy that need to be addressed and mitigated.
Nonetheless, it is still recommended that business planning be done in conjunction with experts who can assist with building an achievable growth strategy. Most importantly, the strategy will need to include clearly defined measures of success as well as a strong understanding on what is needed to achieve a successful outcome.
External individuals including experts, board, advisory and committee members are there to both challenge and support the merits of the original acquisition strategy as well as the associated growth strategy. This gives a sense of realism so that the business owner and management teams are properly challenged in terms of their thought processes.
When buying into a business, it is important to think about how that same business can be sold and create liquidity in the future. It is senseless to purchase a business that is unsaleable or has no future capital value unless the buyer has a clear plan of how to pivot that to cater for future demand and customers. Critical to the successful growth of the business is managing the risks. The key risk being how to future proof the business to make it attractive to customers now and overtime, whilst also considering customer and market trends.
As a business owner, being able to define success in goals is crucial. These goals need to be meaningful and measurable. Once properly defined, plans can be developed to achieve them. Should things not to go to plan, multiple scenarios should always be considered including the clear pathway and contingency plans. Fundamental to that is considering the level of investment needed to achieve those goals and how to get this funding.
To measure performance, KPIs should be introduced and need to be continually assessed, monitored, and refined. Budgets and forecasting for both short- and long-term goals are also vital in measuring performance.
How do you optimise the business performance before selling?
When optimising the business performance, it’s important to analyse the information around budgets, KPI’s and forecasts and reflect on all business ‘levers’ available. It can be helpful to go through ‘what-if’ scenarios of those differing levers. Continually monitoring these will ensure optimal business performance and efficiency.
The most saleable businesses are those that operate effectively without the business owner involved. These businesses typically have formal board members, a CEO, executive team and good systems and governance processes.
How do you decide regarding the appropriate time to sell?
There are many aspects to reflect on when deciding on the right time to sell. As mentioned previously, having a clear business plan and strategy is crucial. Secondly, understanding the market and recognising how consumer demand is changing and consequently, what that means for your business. Thirdly, if the work is no longer inspiring, this will likely be reflective in the business performance. Lastly, knowing what is next; whether it be retirement or a new business opportunity, planning is essential and will help determine the best time to sell.
When buying into or setting up a business, the buyer needs to be able to answer why and how can they help grow and develop to ensure exiting the business in the future will not come at a loss. To do this, planning is fundamental. As a business owner, the key to successful performance is understanding the risks and planning to mitigate them. Business owners should not be afraid to seek advice from specialists on the best way to develop and improve business performance as well as on preparing their business to sell.
If you would have any queries regarding selling or purchasing a business, please contact your usual Mazars advisor, the author or one of advisory specialists via the form below or on:
Author: John Blight
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