When you're thinking of selling your company, getting the highest price and an optimal deal structure is a top priority for both, you and your investors.
Buyers today are increasingly cautious and diligent in evaluating companies making the process of selling a business more complex and rigorous. Whether you like it or not, much of the value of your company lies within your management team. The right management team, strategically positioned in the right places, is a crucial driver of your valuation.
Regardless of your personal goals, there are vital issues every business owner must address before they are ready for a business transaction. The key to increasing the value of a company is to understand how a potential buyer views your business, focus on asking yourself and your team better questions before exploring possible solutions.
Here are some things to consider before you make the transition with your company.
Distinguish yourself from the competition.
What can be done better? Aim higher than your competition does. You need to do your homework and stand out from your rivals without emulating them.
Your company should be attractive, focus on your culture.
The company should have established values and strive for a reputation of honesty and fairness; people should genuinely be your company's greatest asset. Investors are attracted to companies with a great culture and low turnover rates because performance is directly related to how engaged your employees are.
Create seamless strategies, routines, and agile processes.
Company strategy establishes purpose and direction. Routines and capabilities allow companies to get things done reliably and repeatedly while agility plays a critical role in making constant change possible and profitable. Moreover, ensure that your company has adequate processes in place that can be executed by others if necessary. Investors see this as competitive advantage and sustainability.
Keep critical employees on board.
Will key employees stay after the company sells? Proficient employees generate real value and bring stability to the company. Buyers want to see driven employees that can work in teams and are dedicated to the overall success of the company. You can increase your company's worth, by actively cultivating a high-quality workforce, especially if employees are motivated to stay with the company after you exit.
Your company should not be dependent on any one person.
The value of the company will be significantly impacted if the future success of your company is dependent upon a few key employees or members within your leadership team.
Does your management team have the leadership, skills, and ‘know-how’ to continue growing the company when you leave? Make sure it is easy for potential buyers or investors to envision how the company can continue to grow and expand without the current owners or key employees.
Are suitable employment agreements in place to help keep management after the sale? It is hard to find high-quality management, talent and skilled employees; demonstrate to buyers the value of the company by having a rooted succession plan, talent acquisition and onboarding process.
Buyers look for a winning executive team; therefore, you need to have top-notch people around you.
Recommendations for a successful transition.
In many cases, owners do not plan early enough to sell their businesses, and they fail to realize that it takes time and thorough planning to optimize the business value to maximize the sale price.
Business and organizational development advisers can conduct a business audit and an organizational assessment revealing the strengths and weaknesses of the company helping you to pinpoint the value drivers and ultimately increase your company's value and sale price. Once you understand the value of the company and the value drivers, you can identify tactics to increase its value.
Understanding the value of your company and building upon it will lead to a more substantial sale price and will maximize the wealth transfer to the company's owners. If the business valuation process has been carefully carried out, the added value will stand up under the most rigorous buyer due diligence.
If you are contemplating selling your company, act now to allow sufficient time to prepare for a smooth transaction. Time is of the essence, and remember, poor exit planning can erode the value of a lifetime of success.
Gregory Buchheit is the President of Viking Principle, an Official Member of the Forbes Coaches Council, and a Naval Special Operations Veteran. He is an experienced business leader, specializing in corporate development and strategy with an emphasis on executive and organizational leadership development. Web: www.vikingprinciple.com | Contact: info@vikingprinciple.com