In part-one of this article, I mentioned how purchasers will prefer to buy a business where everything looks good and there are no apparent problems. Smart and neat operations will attract serious buyers; however, this is only one part that is needed to achieve your selling objectives.
There should be no hidden problems or secrets which can jeopardize the purchase. Any undesirable factor not disclosed to the purchaser can lead to a non-sale, or at the very least, something they can use as a negotiating tool. The fact that a deal has fallen apart, is not only frustrating, but will cost you money, time, and distraction from your business.
An owner who unknowingly discloses secrets or situations in their business can end up becoming a deal breaker. Issues which are known need to be dealt with to have the best chance of a good sale. Since there may be issues which are unknown the best answer to this is to search for the problems in advance and take care of them. Think of this the same way you would treat the sale of your home. You would normally fix up, repaint, and clean up before you put the home on the market. You should do the same thing with your business.
Not only would you want your physical location to be clean and tidy, but this also flows over to the other parts of your business, such as accounting, financing, marketing material, department procedure manuals, and an array of other business items. Prepared written policies and procedures are a great selling point for a prospective buyer. Remember, when someone is interested in your business, it’s their team that inspects every aspect of your business in doing their due diligence. This is a micro inspection of all aspects of your business, so it will pay to make sure there isn’t a bunch of dirty secrets hanging around.
FIRST IMPRESSIONS AND PHYSICAL APPEAL
The first time a prospective buyer visits your company they make value judgements. They will observe everything from your reception area to your signage in and on the building. If the impression they get is positive, they will want to investigate your company more. You don’t want to lose their interest based on visual appeal of your business. No matter how good your business seems to do on paper, the prospective buyer may lose interest based on your first impressions.
This observation doesn’t end with just the building. Your premises, marketing literature, dress attire of you employees, uniforms, office settings, rubbish areas and a host of other areas should be updated and tidy.
These are the areas buyers are interested in diving deeper into. Are you profitable? Have you shown profits that last few years which have been steady? Has the business shown a steady growth pattern? Does the business have future growth potential (a key factor for purchasers)?
Do you have a written health and safety policy along with risk assessments for the business? If there are any disputes with suppliers, or customers, get them resolved ahead of time. Certainly, outstanding long-time issues, need to be documented as they may not be resolved in the short term.
Buyers want to know details about the internal structure of the business. They will want to know if the business will run after the owner is gone. They need to feel confident that the existing staff along with the newer management team can continue to run the business when the owner departs.
Many owners make the mistake of thinking that they will stay on when a new owner purchases the business. For the most part, new owners don’t want former owners around. They much prefer the key management group to stay and to work with the newer employees.
Do you have a management team?
Develop a key member(s) of your staff by teaching them the important aspects of your job as an owner. Teach them how to be an owner, by delegating to them tasks which you wish to give up. Without a doubt, having a key group is the single most important asset you can have to maximize the value of your company when you sell it. Creating a team of leaders, having team meetings, discussing business issues and having them take on special and extra responsibilities as they grow into more senior roles. This is not an overnight process, but in time, serious employees will learn fast.
Invest in all of your staff. Have them grow in their positions. Have an internal program that allows them to move forward in your company, (Trader Joe’s is a great example of this). Having this type of company culture is a great selling point, not only for a purchaser, but also for hiring new people and retaining well trained employees. It makes developing your key group much easier, and it has substance.
Sometimes owners use of company benefits become blurred, and it really ends up being more of a personal issue. There may be some personal assets that are being used in the business that are not on the balance sheet or business assets that the owner wishes to keep after the business is sold. They need to be defined and resolved before you market your company.
Are they correctly valued for today’s market when you take into account depreciation? Premises should be surveyed an updated valuation completed, giving your balance sheet more value.
Also, if you have old debts that are not going to be collectible, there would be no reason to carry them forward and expecting a new buyer to give them a value, so get them off the books before they come up for discussion.
Other things to consider:
Update audited accounts
Clear up tax issues
Make sure software licenses are legal and up to date
Have written terms and conditions of sales completed- making sure you are legal with the state as far as legal name and filings. This includes patents if any, or restrictive covenants imposed by your suppliers
Settle outstanding disputes with customers, suppliers, or ex-members of staff, or at least what an outcome will be with them if you can’t resolve it
Employee written contracts and job descriptions
Do you have a disciplinary rule book or a procedure? If so, make sure it is updated, along with a drink and drop policy, internet policy, anti discrimination policy and any other required policy
Are all of you employees qualified for their job, along with the proper licenses they need to perform their jobs
Any environmental issues
Check your Articles of Organization to make sure company shares can be sold, and what rights minority owners may have in the sale
Deal with minority share holders in advance as most new owners don’t want to deal with minority interest
As you can see there are many issues to deal with in selling your company. However, over time all of this can be done. In most of my posts I talk about the time needed to implement the sale of your business, now you can see why an owner would need this. There is a lot of implement and refining over time. However, if you start to do this right away, you will find, not only will it be easier to properly be prepared, but your company will be running on all cylinders, making it profitable faster. The end result is that you will create the great value potential of your business when it is sold.