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If the business doesn’t sell, add some value

3 Mins

When a property doesn’t sell, an estate agent worth their fee may recommend some improvement work to boost the selling chances.

Usually that’s sensible advice. Just because you like deep purple walls, for instance, they won’t appeal to everyone, so nothing like a nice coat to magnolia to improve that first impression. Likewise, adding a new £10,000 kitchen could not only sell the house in question a little quicker, but may even add £20,000 to the asking price.

Selling a business is no different. really. In terms of pre-sale grooming, there are multiple things that create more curb appeal.

Some are quick fixes, others need to be planned and implemented years before. Here is a selection for a savvy vendor to consider: 

1. Tie in your critical staff

There are multiple incentive and share schemes that would achieve this. Key acquirers will need some assurances that the key staff will remain post-sale if they need them to.

2. Make yourself completely dispensable

If you are the business it won’t sell without you, remaining in post in one form or another is often very challenging.

3. Have first class and easily auditable information

Part of a sale process involves something called due diligence. This is where a buyer and their team check and verify data and assumptions. I can tell you with absolute certainty that no one ever goes into such a process coming out offering more than they went in with – it is rather an opportunity to chip at the value.

Work on the basis that if your business is reliant for more than 15 per cent of its trade with one customer, unless that customer is irrevocably tied into the company (and that means under new ownership) this will also provide a possible stumbling block on a sale. 

Likewise, product and market development must be seen as being proactively increased and reviewed.

Out of date IT systems and ignorance of social media potential are unlikely to enhance sale potential.

Conversely market domination could prove a problem unless the purchaser is seeking just to take a key player “out”, as the question would be, “Where can this business be taken?”

Clean stock and WIP along with a tidy debtor book should just be part of good business housekeeping, but sadly this is not always the case. If you have a load of uncollectible debts and unsalable stock, the time to reveal this is not mid sale process.

So to get a better value and a quicker sale, start your spring clean early this year.

Jo Haigh is head of FDS corporate finance services and the author of ‘The Financial Times Guide to Finance for Non Financial Managers.’ 

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