Use these 11 points as a checklist to get your business sale-ready for the best possible deal when the time comes.
1. Quality Products / Services
Quality products and services are a hygiene factor when selling your business. Some of the questions buyers will consider when evaluating your product quality are:
Does it solve a problem?
Is it easy to use?
Is it efficient?
What is the durability and lifespan?
Is it reliable?
Does it have a positive reputation/brand image?
2. Own Intellectual Property
Buyers will look at whether a business owns its intellectual property, for example, software systems, the business model framework, and products and services developed by the company.
3. More Than One Geographic Market
If your business operates in more than one geographic market, it reduces concentration risk and makes it more attractive to a potential buyer. For example, a South African manufacturer that sells in South Africa and sub-Saharan Africa brings comfort that should something unfavourable happens in one geography, there are other markets to which they can sell their products and services.
4. Employee Quality and Skills
Most of the time, an investor backs a team. They want quality people who have been there long with solid experience and can be part of the growth trajectory.
5. Succession Planning
Have you got a plan on how your business will move forward when you're no longer there, or does your company's sustainability rely on you at the helm? Succession doesn't have to be in place, but having a plan is advantageous.
6. Absence of Customer or Supplier Concentration Risk
Having all your eggs in one basket when it comes to customers and suppliers is considered risky. For example, if you make one product and sell it to one customer, and you lose that customer, or you have a highly specialised product, and you only have one supplier, and that supplier cuts you off, what will happen to the future of your business?
7. Strong Balance Sheet
A strong balance sheet with a solid net asset value that doesn't have much debt or gearing on it is important because it's a health check of the business. Also, the buyer may want to use some debt to fund a deal, and a balance sheet with no debt gives them that capability.
8. Cash Generation Ability
Cash flow, outside of growth, capital and investment costs, is typically what an investor looks at because that is where they see their returns.
9. Good Quality and Well-Maintained Property, Plant and Equipment (PPE)
If you're a manufacturing concern or a business that relies on hardware, ensure it is well maintained and looked after. Machinery that needs replacing can be a significant detractor for a potential buyer or investor because it would have a negative cash flow impact on the buyer.
10. Effective Inventory, Debtor and Creditor Management
Healthy working capital is important. Buyers will look at your payment terms with your debtors and creditors and the impact on your cash cycle.
11. Growth Opportunities
Acquirers and investors want to buy into a business with growth potential. So if your company hasn't saturated its markets, products or services, and channels, and ticks the boxes in the above points, your business will be especially attractive to a potential buyer.