I don’t want to sell for five years – what could I be doing now?

Andrew Sims

Business owners who have time to shape their business with a sale in mind should think through how they can enhance the value of their business and minimise the risk for acquirers.

Firstly, scale adds value. Scale can be achieved through organic growth or through acquisition. Think about how you can grow the bottom line sustainably. Perhaps consider buying a business, or businesses, that will complement your own business’ strengths.

Reduce dependence on you – owner-reliance can be an adverse factor in selling a business

Acquirers and investors particularly appreciate secure cash flows, so contracted revenue and/or recurring revenue from a broad portfolio of customers is attractive. If you can demonstrate consistent year-on-year profit growth, this will also be viewed positively when the time comes to sell.

Owner-reliance can be an adverse factor in selling a business, so you could begin to reduce any dependence on you as an exiting shareholder by building out a strong management team to lead the business.

Buyers are concerned about business risk, so avoid reliance on a small number of customers or products. Risk factors that reduce value in a business are explored in more depth here.

Finally, good financial reporting builds buyer confidence. Having a robust, reliable suite of financial information will not only help with the running of the business but will also facilitate its sale, and ensure that the sale process can be executed as swiftly as possible.

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