Exit Planning Advice
Successfully selling a business can take a significant amount of time, and to maximise the chances of success can require meticulous planning over a number of years prior to going to market.
Below are 5 simple tips owners can undertake in order to prepare their business to maximise the sale price and value they are offering potential buyers.
A history of strategic investment in marketing, particularly if proven to be successful can significantly contribute to the value of a business and its goodwill. Keeping a record of marketing activities is essential to demonstrate a brand has been developed and gives potential buyers insight into the platform they will be launching the business from. Records not only show which marketing strategies have been successful for certain segments, but also highlight which strategies and segments haven’t proven to be successful for the business, thus mitigating some risk for potential buyers.
Ideally a company looking to exit should address its marketing plan, and development strategies and have records for at least 2-3 years prior to sale.
Having a plan for expansion should be in place for all successful businesses, as a scalable business can be of significantly more value. If a plan can consist of the medium (e.g internet/geographic), costs and difficulties in previous expansions, examples of success in expansion, and a list potential untapped markets it can make a business a lot more attractive to potential buyers.
Maximising profits in the years preceding a company sale will increase the value of a company and also improve the likelihood of a sale occurring, as more profitable businesses are far more saleable. There are a number of simple and some more complex strategies that can be used to achieve this. Simple strategies include taxation manipulation and cost reductions, and don’t impact on a businesses output. More complex strategies are altering the businesses fundamental structures and strategies such as taking out more debt for a marketing campaign or expansion to increase revenues which are the main drivers of value.
Detailed Knowledge of history of business Changes
Over the history of a business it is likely significant changes will occur from year to year in revenues and or expenses. Business owners need to be able to detail what has been the driver of these changes to potential buyers, as it will mitigate a level of risk and give insight into key business value drivers. For example, if a sudden increase in revenues of 40% from one financial year to the next occurs, a business owner needs to be able to give a detailed explanation of the strategies that enabled that to occur. If an owner isn’t capable of this it creates uncertainty, leaves the potential buyer a problem with repeating the growth and reduces the level of goodwill in a transaction.
Knowledge of key business drivers
There are numerous key business drivers for any successful business. Understanding the pillars and drivers that give your business an advantage over competitors is a key driver of value. The drivers of your business value are also what sets it apart to potential buyers. Owners need to be aware if their extensive customer base sets them apart, or whether it’s the owners ongoing personal relationships with key suppliers. Analysing a business’s key drivers and detailing them to potential buyers, will not only give definitive reasons a business has value, it will also highlight the strengths and weaknesses of the business that can be addressed ensure the business can operate at its full potential.
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Quinn M&A’s expert team of business transaction advisors can assist you to with all of your business exit planning, divestment, acquisition and valuation requirements. Contact Quinn M&A today on +612 9223 9166 or submit an Express Enquiry to arrange a confidential no cost consultation with one of our Senior Advisors.