The culture of your company may be best defined by what your employees are doing when you are not around. Are they all clear about, and do they embrace, ethics and business policies? Are they aligned with the mission of the company? Is there a loyalty to and camaraderie in the company?
What Do Your Financials Look Like?
There are many issues here. Start with whether the financials are well prepared on a timely basis by competent staff. Are they audited — if not, begin so immediately. Many buyers will either not accept unaudited statements or discount the financials and hence the valuation. A favorite saying among investment bankers is, "In God we trust; all else bring data."
If you have a bank financing relationship in your business, you are probably used to discipline around audited financial statements, quarterly P&L projections, cash-flow statements, etc. If you do not have such a discipline, it should be a central part of your sales preparation to engage an accountant to build such a discipline for you.
Do You Have a Business Plan?
After the examination of the quality of your financials, product lines or services, a buyer is going to be very interested in your business plan. It will tell a lot about how the business has been managed, how engaged management employees are, what future expansion and growth might look like and from where it might come.
Reasonable capital investment with large returns on investment excites buyers, who will pay a premium for such future growth. Help the buyer envision how the business can be more than stable cash flow by providing a substantial growth opportunity.
For example, look for opportunities to add shifts for manufacturing, cross-sell products to customers, negotiate investment or better terms from vendors, etc. These are all actions that perhaps you should or did consider bringing to your business but have not yet accomplished. Realize some benefit now by blueprinting the opportunity.
Consider Where the Market Is in a Sales Cycle
There are times when the markets are very generous in their valuations of companies with active buyers paying a premium to usual valuations. That is a glorious time to sell and makes the seller a genius in the execution of the sales strategy.
But as the sun rises and sets, so too do these windows close, often abruptly. Buyers still buy outside these times, but much more cautiously. It may not suit a seller's objectives to wait the three, five or seven years for the next sales cycle. One then needs to offer insight to the buyer as to how he or she would be planning to manage in a more recessionary market, showing flexibility and resilience in products, staffing and sales.
For example, in the most recent business cycle, sales of businesses were brisk and generously priced until 2007. The period from 2008-12 had far lower sales volume and diminished valuation multiples. Those who sold in that time period were often out of need (weakness) or based upon a solid business history and an executable plan for maintaining an excellent, though cyclically contracted, business (strength).
Building Your Sales Plan Now
Consider where we are now: the beginning of the next cycle of sales with increasing valuations? If so, the next three years should offer great opportunity for the sale of a well positioned and thoughtfully marketed company.
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