Research shows 70 percent of businesses think succession and exit strategy planning is important but only 12 per cent have a documented plan. Unsurprisingly, the main motivating factor for the creation of a plan is age.
- What is your business worth now?
- What would your business be worth in 12 – 36 months time if your worked on a value improvement plan?
- What is the ‘Value Gap’ or the financial benefit of working on the business?
The key is to provide a potential buyer with security
The primary reason someone buys a business is to get a return on the investment. Each potential acquisition will be judged on the level of future profits the buyer believes the business can generate and the level of risk attached to reaching these targets.
Buyers will minimise their risk by carrying out thorough due diligence and investigating the business. Sellers can maximise their position by being prepared for the scrutiny that prospective purchasers will put the business under. The more prepared the seller, the higher the ultimate price that they may negotiate.
- Ensuring there is a sound financial history.
- Records of a steady increase in profit for the last two to three years, with a similar increase in sales over the same period.
- Positioning the business as a good low-risk return on the investment.
- Highlighting an established customer base, sound internal systems, market awareness and credibility, an operational framework and cash flow.
- Highlighting positive industry trends.
- Highlighting company awards, testimonials or even an ecologically responsible product or service.
- Ensuring the business does not appear to be reliant on the owner and that there is a succession of employees that could take over the existing owner’s job when he/she departs.