How Systems & Processes Increase The Value of Selling Your BusinessFeb 01, 2023
If selling your business is part of your exit strategy, you will need to get your house in order, so to speak.
Preparing your business for acquisition is like selling your home. The new owner could either build one from scratch or buy an existing structure. However, if your house has a kitchen that hasn’t looked stellar since the 1980s, you’re going to have to renovate it into a space that suits today’s market.
Likewise, investing in a bathroom update will get the attention of the buyers willing to pay top dollar. When it comes to businesses, setting up effective financial systems and procedures saves new owners from flushing money away as they get their house in order.
In other words, why position your business as a fixer-upper when it would get a better price as a turnkey operation that saves time and produces profits right away? Instead, as a selling point, show the potential new owner that they can already ensure low overhead cost, maximize revenue, limit wasted time, and protect themselves against fraud.
In most cases, this greatly reduces the number of working hours needed to reach operational efficiency. Now, entrepreneurs will purchase a cash-flowing asset, not a full-time job. It’s more valuable for business owners since they start recouping their initial investment much faster.
Preparing for a sale can increase the value of a company even if you choose not to sell. Any business owner can take the following steps to ensure that their business is ready for a profitable acquisition:
Present transparent financial statements
An internal audit assesses the company’s internal controls, corporate governance, and financial systems. Usually these audits will reveal financial data that will benefit your company even if an acquisition doesn’t come to pass.
From here, ensure you have transparent financial statements to earn trust from your potential buyer. No one likes surprises, especially when they produce extra costs or time-eating processes to fix them. Be upfront and don’t sweep anything under the carpet.
Make sure your balance sheet is uncluttered, has relatively low debt, shows no out-of-date assets that tend to dog businesses at the lower end of the market and, above all, accurately reflects your company’s current financial position.
Systemize your company
If you believe your company is not sustainable without you, you need to create systems that can work without you there. Determine what could potentially go wrong in your absence and draw up a list of standard operating procedures so that anybody could come in and take your place.
Think of it like instructions to a new home owner on how to run the furnace or what day to put out the garbage. Providing a comprehensive procedures manual on your systems work fills in any questions the buyer may have. Consequently, they feel more confident about taking over your business.
For example, set up procedures for sending an invoice, ordering materials, and reimbursing employees for travel expenses. The system should explain who completes each task and how often.
Using systems eliminates staff confusion about how tasks should be completed and it also serves as a training tool for new employees.
Streamline your business
Create a strategic plan to provide you, and financial acquirers, with a roadmap of where the company is going to generate value over the next half decade. This reviews non-core assets or product and service lines that have subsequently become redundant and used by only a few clients every year.
For example, a company may offer a product that accounts for a small proportion of annual revenue. Meanwhile, it isn’t required in any meaningful way by its main customers.
Removing it allows the company to focus on core products, while streamlining its inventory.
From here, you’ll want to set up excellent processes and systems to keep on track. Trust me, it’s worth the small expense to create clear pipelines throughout the business. Like key rooms in a house with plumbing, this investment will pay off since it makes it easier for the new owner to move in and feel at home.
Tell your story well
When showing a house, a realtor will often tell the prospective buyer that the previous owner is downsizing or moving to a new community. What’s your story when you list your business for sale?
Task your team of experts, as well as your marketing and public relations teams, to work with you to ensure that you have a compelling, credible story to tell before and after an acquisition. You and your company will be in the spotlight, so why not shine at your brightest?
Look at your business from an outsider’s perspective and anticipate what questions would arise. What would you like to know if you were going to buy a new one? It’s better to have your narrative ready beforehand so it rolls out more naturally.
Selling your business doesn’t happen overnight. Whether the building is part of the sale or not, you need to prepare to put your best face forward. Ideally, you want the strongest buyer to see themselves settling in nicely.
It takes time and a fresh perspective so your hard work reflects well during a showing. By following these steps, you have a better chance at selling to the right person at the best price. It’s worth the investment.
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