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When you are courting buyers, you need your business to be portrayed in the best possible light—it’s not very different from selling a house. However, some of what you need to do to make your business more attractive to buyers can take some time, so even if you aren’t considering selling right now, you may want to get the process started. You might even find that it helps your bottom line.
Improve Your Income
Cash is king. So work on your income statement. Owning a business comes with inherent perks. Business owners will often provide benefits to their family, accelerate depreciation, or pay above-market rent or salaries. If you’re thinking of selling, it’s time to recast your financials to exclude these perks and make them reflect the way a company ought to look to potential new owners.
Concentrate on Your Core Competency
A company with a strong focus around a core business tends to be more appealing to a buyer than a company going in many different directions at once. Even when they do focus on a core offering, business owners can lose sight of potential shortfalls within divisions, in service or product lines, or with the types of customers, they are working with.
This problem is typically due to a lack of real-time reporting that would reveal shortfalls. In addition to getting profit and loss statements by division, obtain reports breaking down the number by item, customers, and customer-types. These can reveal weaknesses that you’ll be able to mitigate—before risking having potential buyers point them out to you themselves.
Build a Mini-Business Plan
Selling a business requires sales skills. In addition to a traditional business plan, Jim Chamberlain, a financial expert with SCORE, a nonprofit organization helping educate and mentor small businesses, suggests telling “your story” when presenting a business plan to a potential buyer. Include staff retention and what makes your business appealing to existing and potential employees. Provide an explanation on what you want out of a business that is worth someone else’s investment. Are you hoping to spend more time with your family, to travel more, or—better yet—do you know the growth potential in your business but also know that you aren’t in a position to take it there on your own?
Make Yourself Redundant
Make it easy for a buyer to step into your role. If you are responsible for a core function within the business, begin looking for a replacement—someone who can work with the new ownership in the years to come and allow you the freedom to leave or to move to a new position within the company.
Often the most difficult transition is for owners who are also acting as salespeople. Project managers and even office staff often have an understated rapport with customers that can easily translate into sales if moved into this new position. This is important since buyers will want to see that your clients will remain devoted to the business even if you are not around.
This is also the time to document any policies and procedures that currently exist only as unwritten rules. Create a procedures manual, or update the one you have already. Any buyer will then be able to operate the business without the need to rely on you.
Think Like a Potential Buyer
If a buyer walked in off the street today, what would their first impression be of your office, your warehouse, and the delivery trucks in the lot? Too often businesses, specifically ones that don’t have clients that visit them, fail to consider the first impression their locations might create. Make sure that everything’s neat, clean, and organized.
Keeping things tidy is important in the digital realm, too. Many prospective buyers now look closely at IT. Your systems must be sufficiently robust to enable you to quickly and efficiently access any detailed information requested by the buyer. Claiming that “we’ve always done it this way and have been successful” isn’t going to excuse outdated technology and processes. Spending a little extra on “good appliances” can increase the overall value of your business significantly.