If you intend to fund your retirement by using the proceeds from selling your business, you might understandably be wondering how you can ensure you receive the maximum value from the new owner.
Fortunately, there are various methods at your disposal that you can use to appeal to someone looking to buy your business.
Here are four simple but effective ways that can make your business even more attractive to potential buyers.
1. Having a clear succession plan in place
First and foremost, you should have a clear succession plan in place for the business.
Many businesses are built around owners who have poured their heart and soul into what they do, and yours may be no different. Indeed, you might be integral to the everyday operations of your company.
If this is the case, make sure you have a succession plan in place for how the business will run without you, particularly with the management structure you leave behind. Select individuals who will be responsible for the continued operations of the business, and make sure that they are aware of any specific tasks that you carry out in your role.
Even if a prospective buyer is looking for a project to really sink their teeth into, the last thing they are going to want is to have to rebuild the entire business because it does not function properly without you.
Start this process sooner rather than later so that it is less of a shock to the system than suddenly ripping yourself and your involvement away.
2. Cementing your market position and proposition
Next, consider the importance of cementing a clear and obvious market position and proposition.
Realistically, this should be something that you have done throughout your entire tenure. After all, to excel in business, you need to have shown potential customers and clients why your offering is unique.
Even so, this may be something that fell away as a priority while grinding away on certain projects throughout the years.
So, circle back to this and make sure your offering is clear. You could review your marketing strategy and check that it is still presenting the business in the right way. Alternatively, this might be an internal message, making sure that everyone in the company is singing from the same hymn sheet.
For buyers, it could be off-putting to see a business that is slightly uncertain in these areas. Not only might it affect the price you are able to get, but it could also discourage buyers from bidding at all if they think there will be a difficult period of re-establishing your brand.
3. Improving your cash flow
Good cash flow is vital for the success of any business. So, before you look to sell yours, you may want to consider boosting your cash flow.
Potential buyers might see a lack of liquidity in the business as proof that there is no money available to pay off loans or cover expenses in the event of an emergency.
Buyers want the certainty that the business and its assets are expanding, not reducing down, especially as they are likely putting a great deal of their own money into it.
Your ability to improve cash flow in your business will depend on your specific circumstances, but reviewing it closely and cutting down on unnecessary spending can be a good start in refining it.
4. Clearing any outstanding debts
Nearly all businesses have some form of debt within them. Indeed, figures published by the House of Lords Library show that 757,000 small or medium-sized enterprises (SMEs) had some form of debt in January 2022.
There is absolutely nothing wrong with borrowing money to use for projects and expansion while you are building your business. But by the time you come to close up shop as the owner, you may want to consider entirely clearing these debts.
A buyer might be put off by debt, knowing that they will have to deal with these obligations once they take over. Or it may make them revise their offer to cover this additional cost that they will be taking on.
So, look to clear borrowed money ahead of a sale. Consider speaking to an expert if you are not sure how to best go about this.
Before you sell, ask yourself: what do you really need?
When you come to calculate the value of your business, it is worth first asking yourself what you really need from the sale.
Many business owners think that the right thing to do when selling a business is to target the highest possible sale price.
But if you are intending to use the proceeds for retirement income, it might make more sense to base the sale price around what you actually need instead.
For example, imagine that your business has been given a valuation of £1.75 million, yet you only need £1.5 million to live your desired lifestyle in retirement.
So why would you hold out for an additional £250,000 in your sale when it might not even make a difference to the kind of lifestyle you want to live? In fact, pushing for that additional amount might even dissuade buyers who see it as too much, when they might have considered £1.5 million.
This is where working with us can be so valuable. When we create a financial plan for you, we will consider your goals for the future first, and then look to organise your finances so that you can achieve them.
Consider taking the same approach when selling your business, simply targeting what you really need.
Speak to us
If you would like help managing your money from an experienced financial planner, please do contact us at DBL Asset Management.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for information only. Please do not act solely based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
