Selling your business (Part 5)

By: Olivier Barbeau – regular contributor

In the fifth part of this six-part series on selling your business, we look at maximising your business value

Selling at the right price means demonstrating profitability, identifying potential and reducing risk.

For buyers, value is about opportunity and risk. So your goal should be to present your business as offering a stronger growth path and less risk than similar businesses on the market. If you can achieve this, buyers will have every reason to offer a premium price.

Intangible assets such as customer contracts and relationships, a strong brand, unique intellectual property and future potential are where buyers will see real value. If you also take the time to spruce up your business, boost profitability and mitigate risk, you could increase its value even more.

Communicate the benefits
Part 3 of this series described how businesses have a different value to different buyers and how a high synergistic value often translates into a superior price.

So to get the best price, you should emphasise the value of your business to the buyer in marketing materials and during negotiations. Three key benefits to highlight are: competitive advantage, growth potential and synergies.

  • Competitive advantage: Exclusive product or concept, flagship customers, strong brand, desirable location… be clear about what makes your business stand out.
  • Growth potential: Most buyers use future earnings potential to work out the value of your business. Alert them to growth opportunities such as opening new stores or expanding the range of services.
  • Synergies: Synergies between your business and theirs are attractive to buyers. These could be cost synergies (removing role duplication, logistics cost savings) or revenue synergies (access to your customers, adding new capabilities).

Smarten up your business
Some owners lose business focus before they sell; they may be stressed or tired.

Unfortunately, an ailing customer list, disengaged staff and ageing assets are all turn offs for buyers and translate into lower offers.

So incentivise staff, offload obsolete stock and clean up your warehouse. Upgrade any systems or processes that could improve efficiency and address structural or cultural obstacles to better performance.

You probably know what needs to be done. If you don’t, contract an external advisor to devise a business improvement strategy.

Read more about this feature in Plumbing Africa September page 65.

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