Too many businesses are sold for significantly less than their potential value

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Furthermore, often a high percentage of the sale proceeds are withheld and only paid on an ‘earn-out’ basis, sometimes years after the sale – and long after the owner has lost control of the business

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Why?  Because the business is not fully optimised for sale and de-risked –

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You have worked hard, possibly for many years, to build your business so naturally you will want to secure the highest price possible when you finally sell up. We believe that many businesses are sold well below the value that could be achieved with some time and careful planning. Buyers will understandably look for reasons to a) reduce the price and b) pay as little cash up front as possible to minimise their risk. Creating the right impression helps increase the value of the business and the percentage received up front.
 

So can you improve the perception and increase value?

Usually yes, by careful planning in order to:

– Minimise costs and Maximise profit
– Ensure you are on top of financial data
– Increase operational efficiency
– Ensure appropriate KPIs are in place and trending in the right direction
– Reduce dependence on current owner/s
– Streamline the due diligence process
– Ensure the business is looking as attractive to buyers as possible e.g. modern branding, marketing, premises etc.
– Ensure long term contracts are in place with customers and suppliers where possible
– Delegate authority as far as possible without creating problems
– Ensure currently untapped revenue streams are identified and ideally proven, even if not exploited
– And much more…..

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Note that most businesses are valued based largely on a multiple of net profit. So for example if the agreed multiplier is 4 x NP then for every £25k of additional profit the value of the business could potentially increase by £100k.

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Why can the sale of a business fall through or take a long time, or include a hefty earn out?
In practice the key issue is risk; the buyer becomes nervous about key uncertainties. Our job is to work out ways of reducing risk. We have bought & sold many businesses ourselves and have lots of experience in tackling this problem.

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The comprehensive LAUDIS Exit Planning process covers all aspects of the business’s activities and functions, and identifies any areas where optimisation could enhance value.

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When is the ideal time to start this process?
Well, ideally when you start the business! However this rarely happens, so we suggest not less than 18 -24 months before putting the company on the market, but preferably much earlier. However once the process is complete it is much easier to maintain the company in its optimised state – so it’s never too early, and you never know when you might get an unsolicited approach from a potential acquirer!

We have significant experience in selling and buying companies, so if you are considering selling your company within the next few years why not contact us for a free no obligation meeting – you have nothing to lose and potentially a lot to gain.

For more on Exit Planning download our free Exit Planning brochure here – Exit Planning Brochure Download