One of the questions that clients of Allegiance Capital often ask is “What can I do to make my business more valuable before I put it on the market?”
It’s a smart question.
You’ve put a lot of time, effort and money into building your business. As you get closer to realizing the value of your efforts, there are indeed steps you can take to make your business look its best, both financially and physically. The result often is a higher sales price.
If you’ve sold a house or two in the past, you know this is true. A house that is freshly painted in neutral colors and properly staged so it looks spacious and inviting is going to command a better price, especially in a hot real estate market.
This analogy applies particularly well to the current M&A marketplace. First, you won’t find a market that is hotter than the one we’re in. And second, in this type of market the things you do to spruce up your business are even more valuable than they would normally be.
Unlike selling a house, the to-do list for your selling all or part of your business will be a bit longer. But the ultimate reward will make it all worthwhile.
- First, the easier part: You can spruce up your office and buildings just like you would your house. Well-maintained buildings provide a great first impression.
- On the financial side, keep making money as you always have. If earnings drop, so will your valuation.
- Sell or dispose of slow-moving inventory and office equipment. Resolve legal disputes and be sure that you’ve set aside enough money for things like employee pensions.
- “Lock up” key employees with non-compete and non-disclosure agreements and consider paying them stay-on bonuses. This will help convince acquirers that your company will have quality management in place with or without you.
- Be sure to remove any personal expenses such as automobiles, boats, summer homes and life insurance from your business’s balance sheet.
- Pay any overdue bills and collect any overdue receivables.
- If you don’t have them, institute budgeting processes and purchasing procedures, and create monthly management reports to show buyers that your company is well-managed.
- Lastly, make sure all of your tax filings are accurate and up to date.
This list will provide a good start. Putting yourself in the shoes of an acquirer who will be looking for anything and everything about your company that might raise a red flag will help you think of other problems that you can fix ahead of time.
You can learn more on this topic and many others in a free book entitled Street-Smart Moves for Selling Your Business by Joe Aberger. It’s brief, well-written, and addresses 29 topics that are critical to selling a business like yours. Be sure to Sign Up Now.
And, in the meantime, if you have questions, feel free to call me at 214.217.7732.