The eternal hope for most business owners is that, at some stage, someone will come to them with a big bag of money and offer to buy them out. After all, this is the reward for all the hard work, stress and financial risk they have taken on.
Setting up your business so that someone will want to buy it involves looking at your business from the perspective of a prospective buyer from day one. What are prospective buyers looking for? The obvious answer is that they want to make a return on the money they plan to invest in your business. In many cases, though, there are other factors to consider as well. Sometimes people are looking to buy a lifestyle; sometimes they just want to stop working for other people and are content to make a reasonable income; sometimes they want to eliminate the competition. Whatever their motivation, you can make your business more attractive by planning ahead.
There are three main ways to increase the appeal of your business, regardless of its size, to potential buyers:
1. Show that your business is built on solid foundations. This can be achieved by having a business plan and a marketing plan. Even if they are only simple and straightforward, it shows that you are building your business in a strategic way, not just a haphazard way. Having customer testimonials, and even supplier testimonials, about your business is also advantageous because they show that you are good at what you do. Prepare simple graphs that show how the business has grown in the past. These graphs can include turnover, number of customers, after tax profit, and even the volume of goods that you buy to resell. All of these graphs should show increases.
2. Have a clean business slate. Make sure that your tax and business records are up to date and accurate, and that any issues with customers or suppliers have been resolved. Ongoing disputes can make your business less appealing. Ensure that legal documents are filed as required, and that things like leases are all in order and current.
3. Show the potential of the business. This is the key area that prospective buyers are looking for. Are there ways to increase the amount of business and the number of customers in other words, is there potential for growth? This can be achieved showing industry trends, local business activity for your region, the degree of customer loyalty (do your customers keep coming back?), and continued growth in your turnover (or at least consistent profits). The prospective buyer will have their own reasons for wanting to buy your business and they will tend to have their own ideas about where the potential of the business really lies. You are simply pointing out some of the attractive features of the business that they may not have considered.
There are, of course, other factors that are important, and this is where your accountant and legal representative come into play. Some buyers won’t be interested in any of the above; they will want only to see your profit and loss statements.
From my own experience, and that of successful business people I have discussed this subject with, planning ahead for the day you sell your business and building this into everything that you do will ultimately pay off at the crucial time.