Preparing your company for sale
Russell Copley of Greenborough Management gives us his top tips on preparing your business for sale…
At some stage, many of us will want to sell all or part of our business. Whether this is a part sale to raise investment for expansion or new product development, or a total sale so that you can sit on the beach and count your cash, the process is largely the same.
Your objective is to get as much as you can, as painlessly as possible. If you think of the analogy of selling your house (and most of us have done that a few times), then to prepare for sale you need to get your “house” in order. Present it in the best possible light, tidy up the bits that need tidying, and make it as easy as possible for someone to buy, or buy into.
Business-wise, here’s a brief list of the things you should think of, and the sooner the better!
- Contracts – any purchaser is going to want to understand the strength and weaknesses of your key contracts. Are your key staff tied in on long notice period contracts? On the other hand, do your staff contracts allow for flexibility and change? How locked in to are your key customers? How secure are your supply agreements? Can your suppliers alter their pricing to the detriment of your business? Tidy these elements and you’re managing risk for your acquirer
- Outstanding debt – it’s never good to present yourself for sale with lots of outstanding debt sitting on your balance sheet. An investor is going to want to know that you have reasonable payment terms with your customers and that you stick to them. So, if you’ve got a pile of outstanding invoices, put some effort into chasing payment. Your buyer/investor is going to want to know that you are a good cash generative business, with a reliable and predictable cash flow
- Intellectual property (IP) – this is an area most of us think about when starting a business but become lazy about when we’re actually running the business. Consider bringing in someone to undertake a quick IP audit to identify what IP you have developed, understand its value and put in places to ensure its protection. Remember, it’s not always obvious what IP we have developed; whilst patents are more well known, it’s often the brand name or know-how that has significant value and these, in my experience, are rarely protected properly
- Key assets and borrowings – make a clear list of what your business owns, and what borrowings you have against them. Whilst your statutory accounts will offer a headline picture they won’t link individual debts to individual pieces of kit – and that’s important for a buyer to know
- Documentation – finally, pull together a file of all of your key business documentation and present it in a clear, easy-to-follow format. I’m thinking of Memorandum and Articles of Association (if you can still find them!), Business Plan, Shareholders Agreement, statutory accounts (5 years), financial projections (including cashflow forecasts for the next 12 months)
It’s really not rocket science. It’s just a case of tidying up your house, clearing out the cupboards, looking at your business through the eyes of a buyer and making their decision as simple as possible. Easy!
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