The process of building a business can be exhausting, thrilling, and fulfilling at the same time. Some of your clients may have spent years or decades pushing their companies forward as they pursue their long-term goals.
Eventually, the day may come when your clients might want to step aside to focus on all the things they’ve had to put on hold while they built their careers. They may decide it is time to consider selling their business and moving onto pastures new.
When assessing a potential sale, your clients will want their businesses to be as valuable as possible in the eyes of interested buyers.
They can achieve this by taking small steps to reinforce certain areas of their company and avoiding the mistakes that departing business owners can easily make.
Read on to discover six ways your clients can improve their business in order to maximise its value before any future sale.
- Your clients should have their business appraised and find out its current value
A good starting point for your clients who are looking to sell their business would be to bring in an external appraiser to assess their business in its current state.
This will allow your clients to understand the current valuation of their firm and align their expectations from a potential sale accordingly.
Once a third-party has provided an independent valuation, and they’ve potentially also received a second or third opinion from additional experts, your client will be in a position to form a plan to maximise the value of their business.
They will also have essential information at their fingertips such as knowing which positive factors are already in place that make their business desirable and the areas in which improvements need to be made.
- Your clients should review their accounts and make sure everything is up to date
It’s a sign of a well-run business when potential investors can come in and review clear, easily accessible company records. It promotes faith in the firm and its legitimacy.
Your client should ensure their business has:
- A clear record of all its income and expenditure, and any supporting paperwork
- Contracts for vital suppliers and customers
- Employee records
- Anything else that may help someone new to the business get up to speed.
Doing this, can rapidly progress the timeline of a sale.
It can inspire confidence in potential buyers about the way they have run their firm, which in turn will likely see their business’s value increase from the buyer’s perspective.
Their accounting system can be used to highlight to buyers’ key steps they’ve taken to make their business run tax-efficiently. It can also show signs they have consistent revenues and growth, which will help investors determine forecasts for the business’s future.
- Your clients should optimise their cash flow and maximise their margins
Your clients will want to be able to show potential buyers that their business is operating in a profitable manner with secure margins, a reservoir of cash reserves, and a regular cash flow to build upon.
These are signs to investors that your client’s business is stable and has long-term potential.
Your client will not be able to work on maximising the value of their business if, first, they haven’t addressed any existing inefficiencies or problems.
They will want to provide proof in the numbers that their current model is successful and is likely to continue growing in a positive manner in the future.
Positive cash flow and reserves are vital. However, your client shouldn’t mistake cash flow for revenue.
Buyers want to see actual cash on the books as it is a sign of growth and stability. Healthy revenues might appear good initially, but if high expenses are factored in afterwards, your client’s business might not actually be operating as profitably as it seems.
- Your clients will want to retain and strengthen their existing management team
If your client has taken the steps to ensure a smooth handover of the company for the incoming ownership team, it can go a long way to reassuring investors.
It is important for them to show that they’ve made moves to uncouple themselves from the day-to-day operations of the firm, so that it isn’t dependent on them to continue to function.
One of the ways your client can reinforce this idea is by ensuring that the management team they have built up is strengthened.
This can take the form of steps such as making sure they know the business inside out and that they are capable of maintaining key systems and processes throughout the transitional period.
If your client can show that their management team and other long-term staff members are likely to stay onboard with the business after the sale, this will likely increase the value of their firm to buyers.
Remember: stability is a reassuring sign for investors.
- Your clients should work on their brand’s reputation
A brand’s reputation can directly affect its desirability for potential buyers. It is not an easy task to build a positive reputation, and it can take time and a lot of work. But it is also key to a business growing its customer base and improving its market position.
Your client might want to consider professional marketing advice to figure out the best ways to boost their firm’s reputation and provide them with a strong and vocal platform to get their ideas across to potential consumers and buyers alike.
This may involve social media strategies, paid adverts, industry events, networking, or mainstream press. Your clients may also benefit from listening to feedback from current customers.
- Your clients should work with a consultant to develop a long-term written business plan
The American baseball player, Hack Wilson, once said: “In life, you need many more things besides talent. Things like good advice and common sense”.
It might seem odd taking a page out of the book of an athlete from nearly a century ago. But Hack’s quote rings true.
Your client might be a very talented individual that has built up a successful business over the years. But that doesn’t mean they can’t benefit from good advice and valuable tips.
Your clients should consider reaching out to key advisors, such as a financial planner, to help guide them through the process and develop a firm plan for their exit.
Experts might be able to provide their own unique thoughts and contributions to the business that will ultimately maximise its value before your client opts to make that eventual sale.
Get in touch
A financial planner can help navigate your client past the challenges they may face when selling a business and help them make informed choices that could increase their firm’s value.
The first step is getting in touch either by email at mail@delaunaywealth.com or calling us on 0345 505 3500.
Please note
This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
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