You are the owner of a company. You thought at one time you would hold on to your business forever. You now find yourself thinking “forever” is a very, very long time.
And with the competitive pressures of globalization and industry consolidation squeezing many businesses out of the market, you and your board find yourselves more frequently discussing the pros and cons of selling your business.
So how would you begin? Well, if you are like most entrepreneurs, you’d set about getting your lawyer and your trusty accountant to sharpen their pencils and start figuring out just how much you can get for your business. On the face of it, this logic seems pretty straightforward: you set your price, you find a buyer, they will see the value and buy your business. Right away.
That’s the logic.
But as seasoned entrepreneurs understand all too well, business is rarely linear. So what do you need to do from a management perspective to avoid having the sale of your business drag on endlessly, to avoid downward “price adjustments” that represent money out of your pocket, and escape the trap of “Let’s just get it rid of it already!”
In search of some insight, I spoke with the president of a Vancouver-based high tech company (let’s call her Jackie) who recently sold a business for top dollar in one of the smoothest transactions I’ve ever had the privilege of witnessing.
According to Jackie, there are many things a buyer will scrutinize when they conduct due diligence on your business. The critical factor, however, is that like prospective home buyers, most business buyers are not interested in taking on major repairs or improvements upon taking possession. On the contrary, they are looking for a turn-key offering that will leave them feeling confident that they’ve made the absolute best choice in buying your business.
So how did Jackie and her team make their business attractive, then identify and successfully court the best buyer and make the best deal? “Our secret recipe is that we had our house in order well before we started looking for buyers. Buyers and the dealmakers should see your house in its best condition from the very first day it’s on the market.” Sound advice.
In fact, preparing a business for sale is actually very similar to preparing a home for sale. Both need to show well: they need to be well-organized, well-maintained, and present an image free of both physical and financial clutter.
Here are three things you can do to ensure that your transaction goes as smoothly and profitably as Jackie’s.
Offer clear service lines.
As your garage, attic, or storage area can attest, a home tends to accumulate a lot of “stuff” for reasons no longer remembered or understood. A business is much the same, with services and products often developing organically based on client and project demands over time. The impact of this is that service lines often end up “cluttered” with overlap and cross-over.
Offer a solid service delivery structure.
Make sure you arrange your service delivery in such a way that it is easy for buyer to take over with minimum effort and adjustment. Nothing puts off a prospective buyer more than a business whose products and services are entangled within a complex delivery system. Would you like to purchase a house only to find that you now need to spend even more time and money on roofing, plumbing and commuting?
Offer a sound organizational structure.
What appeals most to buyers is an organizational structure that clearly supports your business and its service delivery model. According to Jackie: “We created a group that sold the product, a team that implemented the product, a customer service team that took care of providing help desk functions including small enhancements, and a product group focused on product development.”
So if you find yourself in a position where you are ready to sell your business, and your goal is a smooth, successful transition for all parties involved, following this advice may just get you one step closer to the sweet sound of the three magical words every seller wants to hear: “Name your price.”
Miin Lim is a senior business advisor at Ascent Group, a firm specializing in optimizing service delivery to generate revenue & create sustainable long-term value. Contact Miin at email@example.com and the team at www.pushthelimit.com.