In the last blog, we had a quick look at why you should ‘Make yourself un-necessary’ and ‘Prepare your financial documents (and be prepared to show them)’. In part two of this article, we look at three more things you can do to boost the value of your business and increase its saleability.
(Click here to read part one if you haven’t already- it’s really good)
(Pssst. Once again, ‘quick’ means quick to read. Some of these tips will take time and energy to do, but will be worth it in the long run)
3. Secure any contracts you can
(Do what you can for your business)
This tip isn’t for everyone, but it includes employment contracts, distribution contracts, supplier contracts, job contracts and anything else you can get somebody to sign up for. Honestly, contracts can be a tricky one. They can seem like a difficult subject to broach with employees, suppliers or clients, and truly, a lot of people won’t be interested in signing one… BUT, the more elements of your business your can secure under contract, the more stable your business becomes when you decide to sell (and the more saleable it becomes).
Start by talking to your suppliers and trying to lock in some good prices. They will usually be happy to sign contracts with you because it also helps their business to do so; this protects your margins. Then, try and contract some clients. Remember, to your suppliers YOU were the client, and if you have something to offer your own clients as part of the contract then you both have something to gain; this protects your profits. And finally staff. If you can secure some of your work force through contract, you can protect your business from being damaged by key staff leaving. In the short term, this actually protects your business whilst you’re there. In the long term it gives potential buyers peace of mind.
These are just three examples of how you can contract elements of your business and they are not the only ways to do it, nor will every one apply to you. Regardless, if there are elements of your business that you can secure by contract, do so to increase the ongoing stability, attractiveness and saleability of your business.
IMPORTANT: Speak to your solicitor about drafting your contracts. Don’t write the contracts yourself.
4. Sort your lease out
(Absolutely MUST have- especially if location is important)
If your business’s location is important to its day-to-day operations (and to its ongoing success), then you must absolutely take steps to negotiate as attractive a lease as possible in regards to both its length and options. Like point three, this one won’t necessarily apply to everyone, nor is there a one size fits all solution. Essentially, when it is time to sell you absolutely cannot have any uncertainty surrounding the lease and terms.
What happens if you really can’t resolve your lease issues? As we said in part one, when you sell your business, you must become a master of risk management. That risk needs to be either resolved or offset by a price reduction. If you can’t resolve a lease issue, then you may need to relocate prior to selling. Yes, it will cost money, but quite simply, it just won’t sell if a buyer sees that they will have to relocate themselves shortly after selling. Even for office based business or businesses where the location isn’t important, moving hurts, and buyers won’t want to do it.
Don’t put it off until just before you sell, talk to your landlord about your long term lease plans. Whether you sell your business or you decide to stay, it will benefit you in either case.
(PS. If you own a business in retail, cafe/restaurant, health/fitness or anything similar, resolving your lease issues is vital to finding a buyer for your business)
5. Make a plan for money you won’t make
(To attract WAY more buyers and charge more)
Here I’m talking about preparing a nice long marketing plan and growth plan that extends well beyond the time you sell your business. You need to develop a plan that will benefit you whilst you still own the business, and that a new owner will continue to benefit from in the future.
But isn’t the business’s future success the future owner’s problem?
Of course it is! BUT, the price for which you sell your business and speed at which you sell it are definitely things that fall under your area of concern. For a buyer, a solid plan to move the business forward represents the difference between buying a well built row boat and the same row boat with a massive 20 horse power outboard motor attached to it. Neither of them will sink, but the speed boat will take the new owner where he wants to get- plus, which one would be worth more to YOU?
|This one?||Or this one?|
|(sorry about the dodgy photoshop)|
Now, like all the tips in this series, this one is easier said than done. Many business owners would seriously struggle to find the time needed to put together such a plan by themselves, so it may be worth looking at getting some outside help (Someone like Matt Braithwaite-Young who can help you with developing a marketing plan). In the end, a business that goes on the market with an ongoing marketing/business plan represents a premium offering. You don’t have to do it, but it definitely adds to your business’s saleability.
In the end, most businesses won’t have the time or resources to implement everything, so if you had to choose- do it in this order:
|1. Prepare your financial documents (and be prepared to show them)||(Absolutely MUST have)|
|2. Sort our your lease||(Absolutely MUST have- especially if location is important for your business)|
|3. Secure any contracts||(Do what you can for your business)|
|4. Put the business under management and systemise it||(To attract WAY more buyers and charge more)|
|5. Put a marketing system in place||(To attract WAY more buyers and charge more)|
Now, is this list the be-all and end-all of business preparation tips? Absolutely not! There are so many things that you can do before you sell to make your business WAY more attractive to buyers. If you would like to keep learning about how to about boost your business’s value before you sell, click here to sign up to our mailing list and we’ll email you when the next blog is up.
Thanks for reading!
Principal of Xcllusive Business Sales
Sell your business with Certainty
Would you like to talk to someone about Selling a Business? Our team are happy to talk to you about your personal circumstances so if you’d like to know a bit more about selling your business call us on (02) 9817 3331, or fill in an enquiry by clicking here. We look forward to talking to you.
DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.