When you start grooming to sell your business, you may well be thinking that profit would be a desirable commodity to enhance value. And yet, a lot of companies that make losses substantially sell for millions of pounds. In other words, profit is not the sole reason for maximising value.
Within every company there are hidden assets. The most important asset lies in the management team that will remain with the business post-deal. Management and team – in other words, their ability to work together and complement each other – are vital.
As an owner-manager I know first-hand how difficult it is to trust and to delegate, and how very disappointing it is to be let down (we all know no one can do it quite like ourselves). The problem is that if you do not build this team of competence around you, it becomes much more difficult to realise value in your business when it’s time to exit.
If the skill set and contacts rest with you and your plans include exit stage left to the sun on sale, then a buyer will be suspicious at best about the viability of the acquisition.
The second reason for having a great management team: they may be your future buyer. The more exit options you have, the better.
An ideal team would include someone who fulfils all the principle roles, but specifically sales opportunities and finance.
One of these may even be your natural heir.
Grooming this team is a project in itself, but the better trained your team is, the more they will be appreciated by a buyer.
Sure, they may leave your company (how annoying after you’ve spent money investing in them), but they may have done that anyway and the old saying of if you think training is expensive, try ignorance remains true as ever.
With the properly skilled management team working for you and with you, not only are you enhancing the value of your exit, but the ongoing value of the business itself should allow you to take rewards in the interim financial and otherwise as they will release your time.
Good people are difficult to attract and they need looking after. Always recruit slowly and get rid of quickly. For the right people, make sure you understand what the critical success factors are and manage them like mad.
Get this right and expect to increase your business value exponentially.
Jo Haigh is head of FDS corporate finance services and the author of The Financial The Financial Times Guide to Finance for Non Financial Managers.