Thinking About Selling Your Business? Here's How to Extract the Most Value

If you are thinking about selling your business, there are important factors to consider to enhance its value pre-sale.

For every business owner, there comes a time to make some difficult decisions. If you are looking to sell your business, the most important one is around the ‘what next’, that is, the legacy of the business.

In most cases, your business will be the most important asset you'll ever own, and most people – if they are lucky – will only be able to sell one business in their lifetime.

The more successful the business is, the more significant this decision becomes – and it is vital that you are equipped with the right knowledge if you choose to sell it. Unfortunately, there aren't that many individuals that have the experience needed to offer advice on the process and ultimately, there is no one-size-fits-all approach.

Planning ahead and investing in experts that can help with the process is the first step, and more importantly, these should be individuals you can trust, individuals with the same values that can effectively find the answer to the many challenges along the way.

Secondly, and crucially, you should seek to obtain the absolute maximum value from it.

Here, we’ll provide expert advice on selling your business and what to consider and focus on in order to obtain as much value as possible and ensure your objectives are met.

Planning your exit strategy

Planning a reliable exit strategy allows for a seamless transition to the next stage you have envisioned for your business, and ensures you are prepared for all possible outcomes.

Though there are different types of exit strategies, which can be enacted for different purposes including Initial Public Offering (IPO), Mergers and Acquisitions, Employee/Management Buyout, Trade Sale, and Investment, the overall aims of an exit strategy remain the same.

An exit plan can help you find a clear direction before selling your business, focus on the goals you want to achieve and make strategic decisions with more ease.

Creating an effective business exit strategy revolves around increasing value and limiting waste. Accordingly, an exit plan primarily helps business owners:

  • Develop an awareness of the real value of their business

  • Understand what their business needs to maximise its value

  • Increase EBIDTA

  • Achieve clarity of vision and plan ahead for the next steps

How can I make my business more valuable?

Delineating a clear exit strategy can help ensure you keep your end goal (or goals) in sight throughout the whole sale process, as well as arming you with the tools and the knowledge you need to do so effectively.

The most important part of selling a business is ensuring it looks as attractive as possible to prospective investors. Much like preparing a car or a house for sale, you’d naturally want it to look the best it possibly can so as to extract as much value as possible.

Building a value creation plan

To maximise the value of your business, you should first and foremost resolve any potential issues within the business and identify areas for improvement, and there are a variety of elements that should be carefully analysed in order to identify shortcomings and make adjustments in response.

1. Brand identity

Does your brand have a clear identity? Your brand should showcase exactly what your business is about and what it stands for, and this should come across clearly to both customers and investors.

A brand is much more than just a logo and colours, essentially being your whole business’ DNA, so conducting a thorough assessment of your brand and whether it accurately reflects your business, with the ultimate goal of strengthening your brand halo effect, is an important first step.

2. Digitisation

Digitising a business, that is introducing technologies to improve operational efficiency, helps business owners streamline processes, increase efficiency and productivity and future-proof their business.

A company that doesn’t utilise new technology effectively misses out on new ways of communicating and operating that are inevitably going to be part of any business’ future.

3. Systemisation

Business systemisation involves creating an organised operational model for your business, and one that has defined processes in place. This includes increasing the efficiency of internal systems, simplifying project management and standardising procedures, a main part of which involves automatisation and finding a balance between automated processes and manual labour.

4. Differentiation from the market

Is your business unique? What sets it apart from the competition? How is your business superior to others? Having a strategy in place that can effectively answer these questions creates a competitive advantage, ensuring your business is attractive to your target market.

5. Ethos and vision

Having a defined ethos, which represents your values and beliefs as a business, helps further differentiate you from competitors, outlining shared values between yourself and your target audience – and potentially, investors.

Designing a clear vision for the future of your business shows investors that there’s a clear, desirable path for your business, with profitable opportunities just inches away.

A vision statement – that is, a written statement outlining the purpose and mission of your business - should therefore send a clear message without being too vague or too specific, contributing to forging your business’ identity and showing there are clear goals your business is working towards.

6. Talent acquisition and retention

Your business should seek to implement a strong talent acquisition and retention strategy. A loyal and passionate workforce is at the heart of every successful company, and a business that is attractive to jobseekers will naturally be attractive to investors, too.

7. ESG

ESG (Environmental, Social and Governance) is increasingly more important in today’s world. A strong ESG proposition generates significant additional value for any organisation, demonstrating that it has plans in place dedicated to showing support to important causes.

Potential partners, suppliers, investors and consumers are naturally going to gravitate towards businesses that share the same ESG values.

Increasing EBITDA

At the heart of this process is understanding and increasing EBITDA. The 3-Year Average EBITDA Growth is a valuable formula used to analyse the value of your business and its financial health, and identifying this prior to selling is essential.

EBITDA can help you see how you compare against competitors, as well as achieve a clear view of your performance and your company’s long-term profitability.

Increasing EBITDA can be a complicated and lengthy process, but the following elements are a great place to start:

  • Reducing costs – this involves cutting down on expenses by identifying potential services or utilities you are overpaying for, reducing production or personnel costs and more.

  • Managing your inventory – poor inventory management can significantly affect your expenses, and finding the right balance between what you are producing and the revenue it’s generating can help increase your working capital.

  • Optimising budgets for specific expenses – whether you have a dedicated budget for travel, entertainment or other expenses, reducing these costs in an effective way can make a significant difference.

  • Automate procedures – automating repetitive processes that depend on manual labour is an efficient way to optimise the use of resources, increasing profitability and productivity.

Preparing for due diligence

Preparing your company for a sale also involves preparing for due diligence, a complex process of research enacted by a buyer throughout a business transaction to gain a deeper understanding of a business and its future potential.

To be ready for due diligence, you should have access to all your contracts, leases and financial statements, create clear information about your properties, assets and shareholders, identify and deal with potential liabilities, as well as ensure your accounts are up to date.

The value of professional business consultancy: how Champions can help

The process of selling a business is a complex one, and without the help of expert business consultants you risk making mistakes that could have easily been avoided, losing out on potential revenue as a result.

The Champions team can work with your business for as long as it’s needed before a potential sale to boost business value, identify and solve any potential issues and ultimately turn your business into the best possible of itself, helping you earn more from your exit strategy and the final sale of the business.

For over two decades, Champions has helped businesses plan their exit strategy, delivering proactive commercial due diligence and ensuring EBITDA growth.

Whether you are planning your exit or are simply beginning to consider your options, Champions will work in partnership with you to allow you to understand all available options now and in the future.

For more information on how we can help, please get in touch.