06 Sep Build the appeal of your Engineering & Metal Manufacturing business by getting it ready to sell
John Warrillow believes:
“There’s an art to selling a business well. It comes down to how you package it, the story you tell about it, and the feeling it gives potential buyers when they imagine owning it.”
— The Art of Selling Your Business
Getting your business ready to sell is primarily about increasing its capital value, maintaining profits and making it less reliant on you (the business owner).
You want as many people bidding for your business as possible, so you’ll need to build the appeal of your business as much as you can.
One of the downsides (if it is one) is that by making your business more appealing, managing out the complexities, focusing on your Standard Service Offering (SSO) and making it less reliant on you, this might make you reluctant to sell.
This may sound counter-intuitive to the process, but it does actually increase your bargaining position as you would be happier to walk away from a deal you did not think was good enough or a buyer you did not think was right.
But there will come a day when you want to stop and sell, so here are the main steps from John Warrillow’s roadmap for building your business to thrive without you:
1. Commit to building the capital value of your business, not just the profits and revenue – this requires a big shift in the way you look at your business – start to work ON your business, not just IN your business, and view it as something you will sell.
2. Start making your business less and less reliant on you – if a potential buyer had to choose between a business where the business owner was heavily involved and one where they weren’t, which one would they choose? Manage out the complexities, focus on standard products and teach your team how to sell and market them.
3. Build a positive cash flow business – no one wants to buy debt. Build up the cash flow and cash reserves in your business – this makes it much more attractive.
4. Build a long-term incentive plan for your team – you want your managers and team to stay with the business as they provide the continuity a potential buyer will be looking for, so a 12-24 month reward plan for your key team members provides them with much-needed security and helps ensure they will stay.
5. Tell your team in plenty of time – you don’t want them to hear it from someone else. And they can be involved in presentations to potential buyers.
6. Get support from outside experts, brokers and solicitors – choose experts who are familiar with your market and can help navigate the frustrating process of due diligence once you have accepted an offer.
You already know how valuable your business is, but the key to a successful sale is preparing it so that it is valuable to a potential buyer. These 2 perceptions of value can often be quite different.
Starting to look at your business through the eyes of a potential buyer and building your capital value can feel like a massive shift in focus for you and your team. It is worth remembering that this shift to manage out the complications in your business, to focus on an SSO and to make your business less reliant on you means that when the time comes to sell, you and your team will be ready. It is also worth remembering that preparing your business for it to be ready to sell doesn’t mean you have to sell it.
Click here to access our Business Bitesize library that includes our downloadable ” Built to Sell ” report and dive deeper into what’s involved in preparing your business for sale and read more about John Warrillow’s roadmap and the framework he has created to help business owners everywhere.