In the final three instalments of our 10 blog series, we will discuss running your business as though selling is not a necessity, tackling problems that may lead to legal disputes and the importance of first impressions of your company. 

You, as a business owner, need to be aware of the vulnerabilities faced by your business if the products and services you offer are easy to replicate.

At the halfway stage of our 10 blog series we’ve already discussed removing owner dependence, demonstrating growth in sales, profits and cash with good projections, reducing customer and supplier dependence, adding depth in staff, and making sure your business’ brand values are clear, attractive and resilient.

In this instalment, the fourth of our 10 blog series, we will discuss the importance of brand values.

In the third instalment of our 10-blog series about the steps business owners may wish to consider when working toward maximising value and saleability, we look at some of the external and internal factors at play:

We’re pleased to bring you the second instalment of our 10-part blog series about the steps you can take to improve your business in the eyes of an acquirer, before taking it to market:

Over the course of a 10-blog series, we will highlight the key steps business owners should take in order to maximise the value and saleability of their business. Industry specialist and founder of ‘Prepare to Sell’, Richard Wright, advises 10 key steps.

Thoughts of selling are all too often put off by business owners until a major event demands that it be given due consideration.

Agreements regarding the sale of a business can be structured in many ways, typically involving cash, stock, financing and earn-outs in varying degrees.

In a recent article, “10 surprising lessons learned from selling my company to eBay”, internet entrepreneur, Kristopher B. Jones, founder and former president and CEO of Pepperjam details the lessons he learned during the process of selling his company.

Many business owners, particularly those in the lower-middle market, will often attempt to reduce their tax liability. This practice is commonplace throughout SMEs, a perk that enables business owners the ability to keep hold of more of what they earn.

Time and time again, when discussing the potential sale of their business with owners, one question frequently arises: “Can’t I just sell the business myself?”

Due diligence often throws up a broad range of issues that can threaten to scupper a deal. One of the biggest culprits, surprisingly, is an issue most business owners possibly wouldn’t consider to be a factor in this situation: HR.

Many business owners believe they can sell their business on their own, without using the services of an M&A adviser. That may be the case; however, this viewpoint fails to consider the negative effect on the business that the process of selling and the time it takes will have. Whilst a business owner could potentially sell without specialist advice, it’s highly likely that the eventual value received will be much lower – indeed, without an experienced M&A research, marketing and negotiating team behind them, it almost certainly will be.

When it comes to the motives and objectives of acquirers seeking to purchase a business, regardless of whether they are financial purchasers such as private equity groups, or strategic purchasers such as larger corporates looking for bolt-on opportunities, the key value drivers of the potential acquisition largely remain unchanged.

Many business owners make one key mistake when selling their business: underestimating the value of their M&A adviser. Business owners will often marginalise their appointed M&A adviser to such an extent that it may seem their role is overly costly;however, whilst not all M&A advisers can justify their costs, a good one with strong credentials will surprise most of their clients by truly demonstrating the value an adviser can actually add.

Risk is the most influential factor when buyers are deciding whether to make an acquisition or investment. In cases where an acquisition opportunity has greater growth potential than a comparative opportunity which represents lower risk, the majority of acquirers will pursue the latter.

No two companies are ever the same, as is the case with their owners. For this reason it makes no sense to adopt a ‘one size fits all’ approach when it comes to deal structures as a solution which may work for one company and the personal objectives of its owners may not be suitable for another.

At Benchmark International we always encourage that business owners to plan their exit in advance, as businesses which are ‘deal ready’ often attract the highest values.

The majority of our clients instruct Benchmark International with the task of generating the highest possible value for their company. Although this is our primary objective in any case, it is fully understandable that an outgoing business owner would wish to secure maximum value for what is possibly their most significant asset – it’s human nature, after all.

Whether a decision has been made to sell a business or not it is always beneficial to consider how a prospective buyer would perceive your business. Viewing the intricacies of your business from an outside perspective is typically the best way to identify areas within your business that could possibly reduce overall value upon an eventual exit.

As M&A specialists we are asked one question significantly more often than any other . . .  ‘How much is my business worth?’ Most business owners expect us to give a definitive answer, however, the simple fact is that whilst a tentative valuation can be placed on a company, the acquirer and the manner in which it is sold largely determine its value.

It appears that many buyers are currently on the prowl, attempting to bag bargain acquisitions by exploiting business owners blinded by multi-million Dollar cheques and disadvantaged by a lack of advice from a seasoned M&A professional.

Market factors inevitably play the most significant role in successful deal completions. Industry conditions, the state of local and global economies and country specific governmental legislative environments will largely effect demand and realized value upon any company sale.

Whether you are seeking an exit from your business in the short, medium or long term, it is always beneficial to bare in mind how any potential acquirers will perceive your business. In order to attain the highest value it is important to get the company in the best possible shape. In doing so, business owners should endeavor to eliminate any potential issues which may arise come the due diligence process.

Within the company sales industry many brokers, investment banks and M&A companies often adopt a 'one size fits all' approach when it comes to structuring exit solutions for their clients.

The process of selling a business often comes with a high degree of misconception surrounding it. During our initial meetings with clients, these commonly held misconceptions often come to the fore and our directors are tasked with presenting the realities surrounding the process.

A host of internal and external factors need to be considered when selling a company in order to ensure that maximum value is received upon its eventual sale.

Dealing with business owners day in day out we find it startling how so few have have a considered exit strategy in place. Many believe that when the time comes to retire or move on to something else, all will simply fall into place. The reality is far from that and due to external market factors, timing and planning is crucial in this decision in order to receive maximum value for what will most likely be a business owners most valuable and prized asset.