Vasu Majumdar, Senior Advisor in our Corporate Finance team here at Fortus shares the dos and don'ts of a solid ...
5 ways to maximise Business Value
11 March 2020
Whether you want to increase the value of their business and continue to run it, or you’re looking to exit your business. Focusing on maximising business value now, will pay dividends.
Many business owners are so embroiled in the day to day of running their business that they often fail to consider how to drive long-term value.
Selling a business to the trade, or selling to a management buy-out is often the exit route of choice for many business owners. However, planning and preparation are key to maximising the value of your business before you look to sell.
Get healthy financials
Growing your business and generating healthy profits over a period of time before sale is crucial. Potential buyers like to see a track record of healthy profits and cash flow. Making your business efficient, whilst still investing in growth is also attractive for any purchaser.
Focus also on good budgeting and management information so that a purchaser can quickly see how well the business is doing, and the sale process can move smoothly.
Get your admin in order
Simple things like checking your shareholders register and company documents are up to date, are often overlooked.
Make sure you have employments contracts with your staff, and formal agreements with customers and suppliers wherever possible.
Focus on growth
Don’t falter, push ahead with big projects that will add long-term value to the business, even if you’re considering exit. There’s always a temptation not to spend the cash if you’re hoping to sell but, a well-run project can add value and grow profits, which will make your business more attractive.
Buyers and funders alike are impressed with forward thinking businesses that know their market well and see opportunities for growth.
Ensure you are not over reliant on any one customer or supplier. Spread the risk in your business by ensuring you have a balanced supply chain and a healthy order book from a wider range of customers.
Where possible, try to build some recurring income, as this can add value in a sale.
Make yourself redundant
Building up your senior management team is also crucial. This will ensure that should anything happen to you, or you want to take time off, your business will be in safe hands.
In addition, a strong management team is attractive to potential buyers and funders. You don’t want a potential buyer seeing your exit as having a major detrimental effect on the future performance of the business, as this will affect the value. Moreover, you may be required to undertake a lengthy handover process in any sale, which will delay your eventual exit.
Having a strong senior team may also give you the option of a management buy-out in the future.
We so often see business owners working away year after year, with the vague long-term goal of selling up at some point in the future and retiring. However, it’s very rare that there’s a coherent strategy behind this, and that year on year planning is working towards this. Most owners won’t have really given enough attention or time to plan properly.
In some cases sadly, ill health or misfortune triggers a sale, and in these cases, much of the hard earned value can be lost.
Maximising value in your business now and making it robust for the future means that not only will your day to day life of running the business be easier, but your final exit will be too and you’ll reap far greater rewards from the sale of your business.
As a result of increased demand, both with clients and the wider market, Fortus Business Advisors & Accountants announce key changes ...