Selling your business, or your share of your business, is no different to any other sale in that it has both objective and subjective elements. To get the best outcome from your business exit you need to work on both.
A potential acquirer will look both at the facts and the story you tell. Different acquirers will place different amounts of emphasis on each. The prevalent view on business sales and valuations is that it is driven by assets, financial record, risks and potential. The first two are pretty clear – they are what they are (or should be although different methodologies may result in different valuations).The second two, risks and potential, are more open to influence by ‘the story’ than assets and financial record. This is where we talk about ‘attraction’ and ‘ease of purchase and integration’.
You can expect any competent acquirer to undertake a due diligence process to identify risks and issues, however the final outcome you achieve, while heavily based on fact, will be affected by how you sell the business as well as what it is you are selling.
If you are looking to sell your business you want to offer value, an efficient and effective operation and ease of purchase to acquirers. In return you are more likely to get a favourable outcome in terms of price, conditions and timescale.
So, what’s the story? It’s a three-part narrative:
- The first being the reasons you started or bought into the business and how the vision you had has been realised under your ownership and management.
- The second is the description of the business as it is now. What makes it special, what makes it tick, what’s unique and therefore a prize the acquirer will want?
- The third is your perspective on the yet to be realised potential of the business – the opportunities you haven’t yet explored, the new products and markets that are the next steps of growth and evolution, and the skills and capabilities that an acquirer may have that would create the magic for future value growth.
In any sale the ‘product’ is only one part. No matter how objective an acquirer may set out to be and how comprehensively their advisers undertake due diligence the ‘go / no go’ decision, the price paid, and the conditions attached are all subject to influence – and where there is the potential for influence there is subjectivity.
When you sell a house, you present the best kerb appeal, you talk about the neighbourhood and the community, its location, and you might mention the extension you might have contemplated that would add further space and amenity. Similar applies to your business.
Perhaps you feel that ‘telling a story’ doesn’t fit quite right as there are plenty of objective ways to value a business and the acquirer will drive you down on price anyway i.e. your view may be that the business is what it is and the price will follow.
However, that is to ignore that ultimately it is people who buy businesses and they buy future potential as much as current assets. Everyone wants to feel they have a good deal so if your business feels ‘special’ and you have described unrealised future value then the acquirer will be more likely to give you the price, conditions and timescales you are after.
If you are looking to exit from your business in the next two to five years and would like to understand how exit planning can create the outcome you desire, please call 07966 777797 or send us an email.