Six Degrees - How to Sell a Business You Can be Proud of

After last month's article about company growth, it's time to think about what may be your ultimate objective in growing your company - its sale.

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With best wishes,

Tony Maynard at CMC

07774 982 596

tony@cmc-partnership.com

How to Sell a Business You Can be Proud of

When you sell your company, you will doubtless be concerned for your staff, and for the 'legacy' you are handing over. You have stamped your individual style on your business, and built a loyal staff and a distinct company ethos.

However, though you may quite rightly be proud of these things, they may not be of great interest to a potential buyer. If it's important to you, you will need to give time, thought and care to safeguarding your staff and the core of value you believe to be in your company. 'Grooming' your business for sale will take more time than you think - anything from three to five years. Don't leave it too late!

It's Not Your Baby Any More!

From the moment you decide to sell, you must regard the business in a different light. A potential buyer wants it solely for its asset value, and you need to see it through their eyes. Identify strong reasons that can be easily substantiated, why your business would make a good acquisition.

Conduct an objective 'audit' and start to make changes to get the right image, feel and performance: some things will undermine the sale or reduce a potential sale price, others can be put in which will add a premium to the price.

Don't Hide Your Head in the Sand

• You'll find a purchaser more easily if the business is in good shape. Take an objective look at your staff, and be honest: if someone is really in a position only because you feel loyal to them, don't avoid the issue. There will be choices to be made, and some of them could be tough. But quite often you can restructure in such a way that over-promoted and therefore under-performing individuals feel more secure, even more positive and productive, in a role with more limited responsibilities.
• Replace your own skills. Many entrepreneurs sidestep this by staying on with the new owners - and many will tell you that it was the worst period of their career: answering to a boss for the first time in many years and no longer setting direction. Much better to hand over responsibilities and replace your skills over a period of years, so that the business is able to run on its own with the new owners from the off. Done well, this not only impresses potential investors and adds significant value to your final settlement, but also avoids a situation where part of the sale price is held back to keep you bound to the business for longer than you had intended.
• Always remember that one of the key things a prospective buyer looks for is the effectiveness of the senior management team, which is as much a prime asset as a piece of real estate. Get good people in place and train them in every aspect of the business. You don't have to have everything finished, but your purchaser needs to see that you've thought about it and have started the process.
• And, don't forget, crucially, to communicate your exit intentions to your senior management team as early as possible. There's nothing worse than a prospective buyer coming in and meeting a team who react with total surprise to this development!

Root Out Skeletons!

Don't give potential purchasers unpleasant surprises that will hand them a negotiating tool on a plate and put you on the back foot. Conduct 'due diligence' in advance, with the help of your professional advisers, and clean up any murky areas before you go to market. Problems from our experience include:

• minority shareholders, long since forgotten, dead or disappeared, who must be consulted about the sale. They own a piece of your company! Track them or their heirs down and get the paperwork sorted out. Better to do it now than lose the sale or have thousands of pounds knocked off the value of your pension!
• issues over ownership or change of use of your premises. One CMC client nearly lost a sale over the discovery that a change of use of their building, legitimately arranged, had not been officially registered with the council. Discovering something like this at the due diligence stage makes purchasers very nervous and causes them to question everything even more stringently.

Some law firms now produce pre-packaged due diligence tools, and may even discount the cost of these against their fees if you use their services for your eventual sale. Ask your solicitors if they provide such a service and on what terms.

Don't Cut Corners

Good advice will cost money. Regard it not as a cost, but as an investment, and cost it into the selling price of your business. Your investment will be paid back many times over in the eventual ease with which you find a buyer and negotiate a successful sale.

If it matters to you that you sell a healthy business as a going concern with your staff and your legacy well taken care of, you've only got one chance to get it right. A well thought-out exit strategy, started well in advance, can help you successfully market your business, maximise the value you get from it, and ensure you end your involvement with as little disruption to the business, and its employees, as possible.

If you'd like some advice on how to 'groom' your company for sale some years ahead, give me a call on 07774 982 596, or email me, Tony Maynard at CMC for a chat about how we can help.

Forthcoming Events in the CMC Academy

Click the links for more details:

Managing Employee Performance

16 June 2009

A seminar covering the key aspects of and tools for managing employees' performance, to get the best results from your staff.

Vision, Commitment and Action Workshop

8 July 2009

A seminar for anyone looking for a way forward, a breakthrough or inspiration.Particularly suitable for owner-managers of SMEs who want to grow their businesses.

Who are Your Ideal Clients?

14 July 2009

A seminar for people who would like to identify their ideal clients: when you know exactly who you are targeting in your business, you can use your marketing budget much more effectively.