Maximising the value of your business
Most business owners are entrepreneurs who excel at what they do but have never before been involved in selling a company. The first port of call for advice is often their accountant who will usually provide a valuation using traditional methods.
When we are selling businesses we apply lateral thinking and invariably find that we can significantly enhance the sale price over conventional valuations by concentrating on these 5 key areas:
Don’t live in the past, sell the future
The past three years history will only influence the price by a small fraction compared to the potential that we can help demonstrate for the next three years. This is one of the key reasons why a premium price will be paid for a business and where so many accountants undervalue their clients’ businesses.
Consider the buyer’s motives
It is the buyer’s interest in your customer base, growth potential and other key areas which will ensure that you achieve the maximum price. Always concentrate on the buyer’s motives rather than getting bogged down in technical accounting arguments.
Identify the optimal purchaser
The reality is that there is a lot of hard work involved in identifying the ideal purchaser. There should be no short cutting involved in this time consuming but essential task. Lateral thinking is important in identifying the right types of potential purchasers – from direct competitors to suppliers and customers, companies in related sectors, investigating the possibility of a management buy-out or buy-in and thoroughly researching overseas possibilities.
Introduce bidder competition
Competition is essential in achieving the best price. It is key to speeding the process, which minimises the vendor’s risk, and is a major factor influencing the terms of the deal. For example, whether the business is sold wholly for cash, partly for cash and part deferred, the terms of any earn-out, and so on.
The more competition is encouraged, the stronger your position becomes.
Maximise underlying profits
It is, of course, essential to make sure your historic profits are presented in the best possible light, adding back any unusual or extraneous expenditure, excessive remuneration, and so on. There are however many more factors in the pre-sale grooming process which can greatly enhance the price, putting the business in a position to demonstrate and underpin the potential for profits with robust resilient forecasts.
If you would like to arrange a free business evaluation to learn more about how we could help you sell your business for its maximum value please call Malcolm Coomber on 020 8652 2450 or email mec@clarksonhyde.com