Run it well, sell it well

Run it well, sell it well

Business Sales Article

Proof positive

Selling a business successfully is, in many ways, no different to running a business successfully.

Once a potential buyer is interested, there’s little that will be more attractive than seeing that the enterprise is well-run, and well-positioned for its unique mix of opportunities, risks and obligations in the market, says Paul Dixon, who heads up Bayleys’ Business Sales, Hotel, Tourism and Hospitality team.

“There is no doubt that running a business successfully and professionally very much assists in its preparation for sale and achieving the optimum outcome in selling that business,” says Dixon.

Though every business is different, experience points to universal ingredients that enable owners to operate – and ultimately sell – a successful and profitable business.

The right people

Having a high-performing and stable team with a positive workplace culture is an advantage for any business, and a strong selling point. So too, is ensuring that the management team is competent – regardless of ownership. The impression of a well-managed team will be reinforced if you’re able to show clear, well thought-out and up-to-date structural charts, HR manuals and employment contracts.

Knowing your market

Being able to show that you understand your client base, have excellent relationships and where appropriate supply agreements are in place, will go a long way towards demonstrating that your business is well-run.

You need to be able to demonstrate a strong understanding of your product offering, distribution channels, competitive advantage, margins and areas of risk and upside, and a thorough knowledge of your competitors.

Having an up-to-date SWOT analysis on your business will demonstrate a disciplined approach. A new owner may see an alternative path for the business, but a clear existing market positioning and business strategy will give them confidence around the starting point.

A record of success

A documented record of successful financial performance will be an irresistible asset for your enterprise. At a more basic level, completed and audited accounts for previous years; regular cash flow reports which show where income is coming from and where it’s going; and a record of effective management of debtors. You should have budgets in place for the current year, with year-to-date progress measured through monthly accounts and year-end forecasts updated periodically.

Ideally, your paperwork should be able to show a consistent pattern of profitable year-on-year revenue growth, and strong control of costs, which ideally decrease as a percentage of revenue as the business grows. Longer-term plans will outline how profitable growth will be achieved over the coming three to five years.

Plans, processes and compliance

The owner of a well-run business will ensure there are clear systems for operational procedures and that these are documented in an operations manual. Annual repairs and maintenance should be detailed along with capital expenditure plans.

A long-term strategic plan will show the business knows where it is heading.

Meanwhile, all licence agreements, leases (plant and buildings), insurances and other contracts need to be current and appropriate, while a detailed workplace health and safety policy will demonstrate that the business is meeting its legal obligations.

Documentation of this type will offer valuable assurance that planning is well in hand from both an operational and strategic perspective, and compliance requirements are being met – which will help head off doubts or questions from potential buyers.

“In a perfect world all of the above – and more – will be in place, both while you operate your business and also when the time comes to sell,” says Dixon.

“The more boxes you can tick in this checklist, the more saleable your business will be.

“In reality, of course, that is quite often not the case, which doesn’t mean the business still can’t be readied for sale and a good outcome achieved. A knowledgeable business broker will be able to advise and assist with this.

“Quite often prospective buyers are attracted by improvements that could be made and the potential for growth when assessing a business.

“The bottom line is that planning for the eventual sale of your business should ideally begin well in advance of the sale date, and in many ways from the day you first acquire or start it,” says Dixon. “A company with a history of being well-run will be more saleable and reward the owner for their years of hard work and investment.”

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