Of the dozen or so transactions I am currently working on, at least a couple of theses businesses have unexpectedly suffered a dramatic drop in performance (not ideal when you are seeking to sell your company for the best possible price). The businesses in question are from completely different industries, in fact one is a service business and one a manufacturer, both sadly casualties of the nervous and fragile commercial environment which we currently inhabit. The question the owners have to address now is shall we continue with sale knowing they will not get the amount of consideration desirable or shall they close the business, take what’s left and hope for the best? I suggest there may be a third option; rethinking the buyer. In an ideal world, there’s a complete sale for cash to a trade buyer – but that ideal world no longer exists, if indeed it ever did. Therefore creative positioning of a business is essential. The first thing to consider then is: what have we got to sell if we no longer have net profit? In the case of my manufacturing business, we have fantastic gross profit but the business is being crippled by horrendous overheads, including a factory now far too big for its needs and a sales force that is minimum in number but still has capacity. The conclusion then is to seek a buyer who could lift the trade into their own premises and use their own sales force to sell this and their own product. Voila. And what of our service business? In this case, there is no great gross profit to focus on, but they do have something special in their brilliant and talented employees and management. The problem here is that they cannot run a business as their creative talent occupies too much of their time. This talent is in high demand and short supply and could, if properly harnessed and controlled from a business point of view, be very valuable. It’s just that this team does not have those skills. The answer, then, is not to sell but to joint venture with a more business-focussed organisation or person who will take over that very important part of the company and leave the current owners to do what they do best. This type of buyer can then help build the new enterprise up in a more acceptable, profit-driven manner and allow both parties to enjoy the success of the joint efforts at a later date. So, if at first you don’t succeed, don’t give up or give in: just think differently and you may be successful where others have failed. Picture source
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