“How long do you want to be in business for?”
Even if you’re managing a start-up or growing enterprise, you’ll probably have foreseen a day when you part ways with your business. Whether it’s embarking on a new challenge, investing your hard earned cash in a new venture, or simply enjoying the fruits of your labour in early retirement – most entrepreneurs have an exit plan.
It might be a long way off, or just round the corner. Either way, it pays to think about the time when you will come to sell your business, so you can start preparing. Obviously you want to be handsomely rewarded for your efforts!
So let’s put ourselves in the mind-set of a potential buyer. What would they look for when deciding whether or not to purchase your business?
The following elements are useful for start-ups and growing businesses alike. They’ll help you to focus on what makes a successful enterprise, and ensure you’re on track to achieving your goals.
1. Strength of brand/offering
Whether you’re a specialist or generalist, your business should have a clear value proposition and compelling offer.
2. Proven track record and reputation in market
This is something that can only be achieved with time. You must have a long-term view and commitment to quality from the outset. A solid reputation depends on quality, consistently delivered.
3. Quality/loyalty of the customer base
Choose your clients wisely – good clients tend to attract more good clients, and vice versa. Be wary of chasing the money and exposing yourself to volatile customers, poor payers or disreputable outfits.
4. Opportunity for profitable growth
Buyers want to see potential. If you maximise your growth before selling, you are taking away future value. A difficult one to judge, but it’s generally more profitable to sell when you’re still expanding.
5. Quality of management and in-house skills
Opportunity and potential for growth is all well and good, but it requires good management to take full advantage. Ensure your employees are fully competent and internal processes are up to scratch, or this could affect the value of your sale.
6. Robust management information
You should have the ability to monitor business performance, which in large part is achieved with…
7. Quality IT systems
After employees, the IT systems are the backbones of most businesses. Investing early in reliable infrastructure will facilitate smooth running of your business. If your IT is in disarray, expect to lose buyer confidence.
8. Sustainability of earnings and quality of profits
It goes without saying that buyers will want to see healthy margins – and a predictable stream of income.
9. Low overhead ratio/flexibility in model to scale to business
Agility and scalability means your agency can stay lean when it has to, and expand when opportunity comes knocking.
10. Ease of integration/synergies with the purchaser
This is perhaps the only point which doesn’t have direct relevance to start-ups or growing businesses.
When you come to sell, it helps to have things in common with your potential buyer to sweeten the pot – for instance, having premises in similar locations opens the possibility of consolidation.
So that’s my personal Top Ten Tips for making your business as valuable as possible. Remember, these pointers aren’t just about creating a tempting business proposition for potential buyers – they’re also a recipe for a sustainable business model.