6 Little Things That Make A Big Difference To The Value Of Your Company
In the Tour de France last year, the race was turned on its head on the penultimate stage. Primoz Roglic was seemingly in the driving seat for claiming the yellow jersey the following day on the Champs Elysees. A significant time advantage and supposedly better at time trialling. However, his fellow countryman Pogacar, was not reading the same script and blew away the field to claim the top spot on the podium.
And when it comes to selling your business, markets can be equally cruel. Get everything right, and you can successfully sell your business for a premium. Misjudge a couple of minor details and a buyer can walk away right up to the last moment, leaving you with nothing.
Here is a list of six little details to get right before you put your business on the market:
- Find your rental agreement. If you rent space, you may be required to notify your landlord if you intend to sell your company. Read through the fine print and ensure that you’re not scrambling at the last minute to seek permission to sell from your landlord.
- Professionalise your books. Consider having audited financial statements prepared to give a buyer confidence in your bookkeeping.
- Stop using your company as an ATM. Many business owners run trips and other perks through their business. However, if you’re planning to sell, these treats will artificially depress your earnings. Consequently, the value of your company will reduce in the eyes of a buyer by much more than the value of the perks.
- Protect your gross margin. Oftentimes, when leading up to being listed for sale, companies grow by chasing low-margin business. You tell yourself you need top-line growth, but when an acquirer sees your growth has come at the expense of your gross margin, they will question your pricing authority and assume your journey to the bottom of the commoditisation heap has begun.
- If you’re lucky enough to have formal contracts with your customers, make sure your customer contracts include a “survivor clause”. This should stipulate that the obligations of the contract “survive” the change of ownership of your company. That way, your customers can’t use the sale of your company to wiggle out of their commitments to your business. Have a lawyer prepare the language to ensure it has teeth in your jurisdiction.
- Get your Value Builder Score. Take 13 minutes now to answer the Value Builder questionnaire. You’ll see how you perform on the eight key drivers of company value. Hence, you can identify any gaps that you need to fill before taking your business to market.
Like competing in the Tour de France, selling a business can be an all-or-nothing affair. Get it right and you will walk away a winner. But if everything is not tied down then it can slip away and leave you back at the start.