Selling Your Business? - 5 Tips To Get Top Price
There are many reasons why a business owner would be looking to sell their business. Maybe they are retiring, look for a change of scenery or the goal was to build the business to sell sometime in the future. Whatever the reason, when the time comes the question that I am always asked is – How do I sell my business for the most money I can get? Many business owners expect a return for the 30 years of 100-hour work weeks. Unfortunately, that’s not how it works and for you to get the best outcome for your business, a potential purchaser needs to be satisfied that there are sufficient future profits. The more confident the purchase is that your business will continue to be profitable into the future, the higher your sales price will be.
One method of valuing a business is net present value of the future profits that this business will pay the purchaser. No one's going to buy a business they expect to indefinitely make losses. So, people will look to buy a business that has future profits. There are exceptions where a business may still be valuable if it has been previously making losses but has potential for future profits. The Net Present Value in these cases will still be positive. IT start-ups are a great example of that, where they may be loss-making, but they're constantly growing their sort of customer base that the purchase can very quickly be into profitability.
And an example of that might be software that we use in our business, say Xero Accounting Software, which has a many billion-dollar value and it might have only posted a profit in only one year but that's because the future benefit of that business is seen to have tremendous value. My point is that when a business is for sale, we need the purchaser to have confidence. What influences how much they're prepared to pay ultimately comes down to their confidence in that how likely is it that this is going to be a successful investment. The riskier a transaction is for the purchaser, the far lower the multiple that you might be able to sell your business for. There are many areas of a business that can impact the risk to the confidence of the buyer during a sale and they include key personnel, systems and process, the concentration of clientele, competitors, and changes in technology to name a few.
So, when you are preparing your business for sale, there are specific areas or things you need to focus on including Human Resources, Finance, and IT but one area that business owners overlook is how much time they put into building in potential buyers through the branding and marketing of their business. Here are some aspects of branding and marketing that need to be considered by business owners wanting to sell their business.
Have a clear plan
There are a million different ways to market your business and each of those ways have a million different marketing options, but until you've got the plan clear, and your objectives targeted towards maximising the value of your business to sell you're just spinning wheels. Without a clear plan, you will spend many hours on marketing and will have no idea what is working and what isn’t. You could be unknowingly eroding the confidence in potential buyers. You have got to get your purpose clear, and then you can take the appropriate strategies and then execute them. If selling your business is part of your vision and your plan, we'll put it on your plan, document it, and then design the branding and marketing strategies with that end in mind.
Have your key people on board
If your business is to be sold with key people, they can have a dramatic impact on the ultimate value of the sale. Having them on board and executing your marketing strategies can increase buyer confidence. There is nothing worse than a business sending out off brand messages to their audience and customers. This will diminish the business's potential customer pool and therefore reduce the Net present value of future profits. Having that buy-in by key personnel is critical.
Make the Journey worth it
The journey being the word there. Selling a business is tough. Many things can go wrong that can impact the final sales price and you only have one shot at it. There are going to be really rewarding times, but there are going to be times of stress and challenges. You've documented the end goal and make sure you've got people around you who give you energy, which are going to add positively to the outcome. Firstly, you have a better chance of getting to the end goal, and you have a far better chance of selling your business at a premium. If the process is stressful for you and your team, this may have an impact on your brand or customer experience. This is an area where marketing can decrease a potential buyer’s confidence in future earnings.
Show your business off
Another way to maximise your sales price is to make your business look the best it can be. Put the extra time in making sure every customer is happy and every sale sticks. Even take on more challenging work to show that delivering great outcomes is one of the core capabilities of your business. Don't just go for the vanilla, chicken flick boring stuff that anyone can do, because that's not going to make you stand out. You want to show that you've got a culture and a skill set in your business that can drive innovation and can deliver on tough projects in whatever business you are in. Then tell the world. Share your success with your audience. Target your digital marketing towards celebrating your business. This can go a long way in creating and building an audience that will buy in the future.
Your People are the key
Invest in your people and develop them and invest in your own leadership but more than that you want to develop people, keep them, retain them. They need to have buy-in, they need to be inspired and adjust to come to work, and that's their best chance of getting A class, people doing an A class work. The process of selling your business can create uncertainty in your team, particularly if they value the security of their employment. A good leader will be able to guide their team through the sale and keep them focussed on helping with the sale and not negatively impact it. Nervous employees will find it difficult to have buy-in with your plans and will more likely be seeking other opportunities.
In many cases, the process of selling your business can take years and as we know, in business many things can happen during that time. Getting your business “sale ready” is a big project and whilst at the end of the day it's all about the numbers, there are many things, including marketing strategies, that can impact the confidence a potential buyer has in those numbers still being there in the future.
If you are planning to sell your business, either now or sometime in the future, speak to one of our experienced Business Advisers to help you get a plan in place so you can maximise the result from your sale.