How to maximise the value of your business
As a business owner, deciding to sell your company is the most important business decision you will ever make. After years of hard work, you obviously want to get the best price for your business which is why you need to plan your exit carefully to maximise value. Our Partner Ian Barton explains some key factors, in increasing priority, that make businesses more sellable in the eyes of acquirers.
- Management team – your existing management team may want to explore the possibility of buying the business from you. A complete and experienced team creates options for you whereas an incomplete one either indicates actions forward presale or determines the need to sell on a synergy basis.
- Independence – your business is not reliant on anyone and independent of others which reduces the risk of other factors influencing the success of your company.
- Scalability – it is critical to acquirers that your business can grow as they will assume you have managed the business to maximise value in the run up to sale.
- Recurring revenue – receiving recurring revenues from customers whether it is contracted annual revenues such as maintenance, or regular income from recurring customers provides a certainty of income to potential acquirers. It also improves funding status with banks for the buyer which open up potential for higher pricing.
- Customer concentration – it needs to be carefully considered if your Top 2 customers add up to more than 40% as income risk will be higher.
- Low market share – although it sounds counter-intuitive, low market shares suggest the business has a good potential to grow in new geographies or markets
- Company size – this is really all about recognising when the business has outgrown you. It can be considered as an opportunity for an acquirer to grow the business to the next level.
- Industry growth – a rising tide lifts all boats but you have to be able to exploit the market advantages that are created.
- Profitability growth – it is an absolute key driver to value. A business with a potential to grow rapidly in terms of profit is always valued more highly than a business with a steady profit year in year out. It is down to many factors not least confidence in your offering but also validation by an increasing market awareness.
- Scarcity/IP – it doesn’t just mean technology and can be a process, market position, license to operate as well as innovation.
As experts in sell-side advisory, our corporate finance team can help you prepare your business for sale and lead and advise you through the process from early stages to completion. Please do not hesitate to contact our Partner Ian Barton on 01491579740 for more information.