Every business owner will, at some stage, sell his business. There is no doubt that most business owners will want to maximise the profit they make when they sell their business and it is wise to focus on this at least 3 – 5 years before the planned exit date. This is an ideal situation but circumstances often dictate a shorter period in which to plan the exit. In these cases, the plan will be short term in nature and should prioritise the tasks that will have the maximum impact on the selling price.

The benefit of many business improvement issues will need time to have the desired impact, which is to achieve a selling price that is commensurate with the risks that have been taken and the work, effort and passion that has been invested in the business over time.

A quick decision to sell a business will, almost always, generate a return well below that derived after a well-planned and executed exit strategy. The lead time involved in selling the business will be much longer too.

Business owners of SMEs are typically swamped just managing their businesses, with little time to focus on an exit plan and its execution. We can assist by analysing your business in order to identify the areas of the business, both internal and external, that need to be addressed in order to make your business a “buyer ready business”, at the optimal selling price.

Buyers are very risk adverse and, in most cases, use external advisors, to assess the risks. It is crucial, therefore, that risks are minimised through this planning process and actions taken to achieve this.

We have a business brokerage in our stable so we understand buying and selling SMEs. We know what buyers are looking for in a business, what makes them comfortable and interested and what has the opposite effect.

We take a holistic approach when preparing a business for sale. Some of the more important steps are set out below:

• Understanding the business owner’s reasons for exiting and their expectations in terms of what they would like to walk away with financially.
• Valuing the business now and calculating the net proceeds for the business owner after settling debts and paying taxes (e.g. capital gains tax).
• Producing a gap analysis between the business owner’s wish list and the current net proceeds from the sale of the business. This analysis will identify what the business needs to achieve financially, to meet the business owner’s expectations.
• The above analysis will provide a financial target that this business advisory assignment should achieve or exceed.
• Buyers are particularly sensitive about, amongst others:
  • Selling prices that are inflated in relation to the business’s earnings and the market conditions
  • Financial systems that are poor, out of date, inaccurate and unreliable
  • The lack of short to medium term business plans that show a growth trajectory
  • Lack of systemisation throughout the organisation
  • Earnings that are inconsistent and erratic
  • Reliance on a handful of suppliers, products and customers
  • No differentiation in a competitive environment
  • High staff turnovers and limited depth and knowledge amongst the workforce
  • Lack of management
  • A sense of disorganisation and that of a dysfunctional operation
• We will undertake a detailed review of the business in its entirety through the eyes of a potential buyer in order to:
  • Grow the key metrics of the business and its strengths (e.g. market share, improved margins through pricing techniques, increase profits etc.);
  • Take advantage of the opportunities it has (e.g. introduce new products, acquire competitors, improve internal systems etc.);
  • Address the risks and threats (e.g. dependence on few suppliers and customers, lack of legal and tax compliance, any regulatory threats, competition, new technologies etc.)
  • Minimise or eradicate its weaknesses (e.g. unreliable, unreconciled and out of date financials, lack of experienced and competent middle management, lack of training, lack of systems and procedures, a disorganised and dysfunctional workplace, work premises that lack curb appeal etc.)

The rewards of having and executing an exit strategy will far exceed the investment made in devising and executing such a plan!