Is your business sale-ready? If not, it should be. So, here’s how to prepare for a successful sale, whether that’s in 2 or 20 years
Following on from our article last month, with more than 50% of financial advisers retiring in the next 10 years, one of the main exit strategy options is to sell the business.
However, selling a business is one of the most important decisions any business owner can take. You have invested a considerable amount of time, money, energy, and emotions into your business. It’s only natural that you’ll want to ensure a maximum return on the investment you have made.
Many factors will dictate whether someone will be interested in buying your business, never mind the price they would be willing to pay.
There are a variety of ways to improve the chances of gathering interest in your business and ensuring the final price is right for you.
Making your business “sale ready” will make it more attractive to potential buyers. To help ensure you have a successful outcome, let’s look at what makes a business sale ready and how you can improve the chances of a successful sale.
Preparation is the key to success
Even if you’re not planning to retire within 10 years, it is never too late to start planning for an exit.
Early planning increases the chances of a successful outcome.
Addressing concerns or implementing changes once the sales process starts can make potential buyers nervous. And nervous buyers can quickly undermine the sale price or walk away from the deal altogether.
You need to know what you want to achieve from the sale, what boundaries to set for the price, and your vision for the future.
You also need to consider your professional duty towards your clients and staff. You’ll want to ensure that customers still receive the same good quality service during the sale and that your staff will remain in their jobs.
Other factors that you may also consider during the planning stage include:
- What sort of sale you want – a share sale or an asset sale
- Your objectives for the company’s value
- Ensuring you understand any shareholders needs or concerns
- Consulting your employees.
Your planning should also involve implementing or improving good business practices before a sale. This will make the sale process smoother for everyone involved, and may enhance the value to a potential buyer.
These good business practices will usually rely on the technology you use.
Enhance the efficiency of your technology
As part of the due diligence processes, would-be buyers will expect to see specific data and information. This information needs to be up to date and include board minutes, customer accounts, governance documents, and finances.
Firms that underutilise technology, having too much reliance on people, using manual operations, re-keying and workarounds will be severely penalised by prospective acquirers.
How a company has used technology to improve its management process is valuable to would-be buyers as it evidences audit trails and compliance reporting. Use of a client system that is engaging and interacting evidences the likely engagement factor of those clients they will be taking on.
A business that can consistently deliver compliant outcomes through effective uses of technology is seen as vital by many buyers. However, if potential buyers feel they need to make significant changes to the technology, it may be reflected negatively in the price being offered.
How well your technology works is a major selling point
The technology used by your company and the integration options available, such as customer management systems, tools and software, may affect the business’s value.
The better the technology, the higher the perceived value.
If a company has evidence of effective use of the technology and how it improves its efficiency, it can show that the business has long-term profitability.
In fact, research from Intelliflo indicates that advisory firms that maximise the use of technology generate 44% more revenue and have 28% more clients than firms that do not use their available technology to full advantage.
From a governance and performance perspective, evidence of systems and controls is increasingly central to the due diligence process that buyers will carry out.
Robust cyber security will appeal to buyers
The ability to handle and process client information correctly not only helps to improve efficiency but also helps to improve the advice process.
However, if you don’t have the most robust cyber security or neglect to put the correct processes in place to protect this information, your company could be at risk of regulatory action.
Cybercrime is also increasing. This could especially be a problem if your business network has weaknesses created by the shift to remote working.
It is down to you to ensure your business can mitigate those risks. You may want to look at things such as maintaining strong access controls, keeping software up to date and ensuring all staff are trained in cyber security.
Due to this, potential buyers will always pay close attention to data handling processes and cyber security. Failure to comply with these measures may result in a loss of value for your company or buyers withdrawing.
Technology is the key to impressing potential buyers
Technology is key to demonstrating a robust business. Having efficient processes and procedures run through the appropriate software will ensure that all areas of your business stand up to scrutiny.
From back office systems, CRMs, RegTech, all the way through to cyber security, it all makes a difference. Ultimately, poor technology systems could result in a lower value or buyers withdrawing.