Mark Nicholls, MD, Tectona Partnership

Guest post by Mark Nicholls, MD of Tectona Partnership.

If you are a business owner, you may well have plans that sometime in the future you’d like to sell your business, and retire happily with enough money in the bank for a comfortable lifestyle.

You may also have some sort of figure in mind, however in our experience, this is often overly optimistic, though not impossible. It takes good planning over a period of years to build a successful business and position it so it is an attractive proposition to potential purchasers.

Here are 7 key actions to help set your company apart from similar businesses and give you a greater chance of a highly successful sale:

1) Start planning now

It’s never too early to start planning. Tidy up your physical premises and spring clean your website – the two readily visible sides of your business. Then consider whom you might sell your business to – the 2 most common types of sale for the smaller business are:

• A management buyout (MBO) (where you sell to your management team); and
• A trade sale

2) Reduce business risk

A business built on solid foundations will command a better price. Take a look at your business model – is it reliant on just a few large clients or do you have lots of clients that have been loyal to your business over a number of years? Buyers like stability, so take action now to broaden your customer base if you need to. This is good business practice whether or not you are looking to sell and makes your company less vulnerable to any downturn of business from a few key customers.

3) “Process-ise” your business

Make your business processes replicable – document them so anyone can pick up the manual and make it happen time and time again. Business processes lead to greater efficiencies, consistency of quality and optimum performance, and make the business more resilient to any loss of key staff.

4) Margin/profit growth

Buyers like to see the potential for any business they are buying. A steady and progressive track record of increasing volume and profitability is most appealing. Perhaps even look at re-defining your market and your customer acquisition strategy to see if more progress can be made to boost income, whilst keeping a keen eye on costs and efficiencies to keep profit margins healthy.

5) Reduce reliance on You

If you are the key person in your company, a buyer will need reassurances that the business will not crumble when you are not there. It’s important to get the right management team in place and put it to the test to make sure they can run the business without reference to you. (One of our clients went on a 2 year round the world yacht voyage with very infrequent contact to do just that!) This can be a good time to bring in the services of a business coach, who can help take an objective view and work with you to put the right structure in place, preparing the business for succession.

6) Motivate to retain key staff members

In almost every business, its people are the most critical element. A potential buyer will want to know that once you have left the company, the right people are in place to take it forward. Put plans into action to reassure key staff members of their future position, post sale, and consider incentives that will reward them for continued loyalty so that they are more likely to remain for the long term. For example, you could consider issuing share options through EMIs (Enterprise Management Incentives); you can read more about this here.

7) Delight Customers

Happy customers are an invaluable asset. Take some time to review your current customer relations, and cast a critical eye over the standard of customer service being provided. If there is room for improvement, make this a priority. Your buyer will want to know that they are taking on a business with a good reputation.

If you put these 7 things in order, along with preparing your paperwork – have contracts readily to hand, shareholders agreements in place and other business documents up to date, you’ll be in a position to present your business in its best possible light, attracting the right buyer, at the right price.

About Tectona:

Tectona Partnership helps business owners sleep at night by providing one of our 15 commercially savvy finance directors embedded in your management team. A part time solution is usually the most effective for the smaller business.  We make sure you have the necessary management information and strategic insight and will tell you what you need to know, when you need to know it. For more information please contact  mark.nicholls@tectonapartnership.com

In our next guest article for Quiver Management, we will take a look at the 7 steps to a successful sale of your business.