Maximising Your Business Value: Preparing for a Profitable Sale

As a business owner, selling your business is a financial milestone, however, to ensure a profitable sale, careful planning and preparation is essential. Strategic thinking and attention to detail is required when exiting a business, to ensure that you are boosting business value. Often, business owners don’t give a lot of thought to the value of their company until they come to consider their business exit strategies, this is why it is key to start as early as possible so you can begin implementing ways to boost the business value ahead of your planned exit.  

Our consultant Carl Taylor has put together a list of some key steps that you can take to start preparing your business for a profitable sale.    

Strengthen Your Management Team  As a sole business owner, it’s likely that your business relies heavily on you, therefore you should consider strengthening your management team to help alleviate the pressure and facilitate increased decision-making capabilities. For a strong management team, you need to identify your key employees that are capable of this role.

Encourage your management team to give you feedback, and ensure you follow through on this, whether it be through implementing changes or acknowledging the feedback - it shows them that their voice is important within the business. Transparency and honest communication always go a long way in ensuring that team members feel valued. Additionally, a potential buyer may be more inclined to purchase if they see a well-trained, capable management team in place to handle the daily operations of the business.  

Give your key employees some skin in the game  Identifying and nurturing key employees is essential for creating a valuable business, and you need to ensure you retain these employees on the journey towards a potential business sale. From our experience, we have found that a great way to incentivise and align employees with a potential business exit is by implementing an employee share plan.

Key employees having skin in the game drives higher productivity, more leadership, less owner dependence, faster growth and more innovation, and ultimately a significantly more valuable business!  

Boost your profits Gaining new customers and controlling costs are essential to maximising profitability and boosting business value, however, another factor that is often overlooked is the power of your Gross Profit margin. A seemingly small increase in your Gross Profit margin can result in a huge increase in your net profit. 4 ways to increase your Gross Profit margin are:  

• Differentiate your business from competitors and focus on what makes your products and solutions different.  
• Pricing – never underestimate the power of this. When pricing your products or services, focus on how much your product and solution is worth for your customer, rather than how much it costs from your supplier.   
• Focus on a profitable product mix. You must be aware of how profitable your products are so that you know where to focus your efforts.   
• Increasing your average order value, whether it be through upselling or minimum order value can help to dilute your delivery costs and in turn, increase your Gross profit margin.   

For more details on Gross profit margin, click here.   

Maintain accurate and reliable financial reports  Maintaining up-to-date financial reports will give buyers confidence. Conduct a comprehensive financial health check when preparing for a business sale, by ensuring your financial statements, tax records, and accounting systems are accurate, up-to-date, and well-organised.

It is important to enlist professional help from your accountants to help you clean up any discrepancies and present a clear financial picture. Using Cloud Accounting software is a great tool for storing key business documents and ensuring that records are backed up and stored for easy reference.   

Distinguish your business from competitors  

• What do you do differently or better than your competitors? A great value proposition could be the difference between attracting a potential buyer wanting to pay a premium, or just an asset sale. Click here for 5 key points on what makes a good value proposition.  
• Maintaining a strong multi-channel presence ensures that you are staying in front of potential customers, it’s key that you are there when the customer is ready to make a purchase and not one of your competitors.   
• Reviews and customer testimonials are extremely powerful tools, providing social proof from your customers will give any potential buyers confidence and trust in your product or service.  
• Having a clear USP and winning sales and marketing machine, will make your business more valuable in the eyes of a prospective buyer.  

Enhance and upgrade until the point of sale:  Maintaining your capital assets, such as buildings and machinery will help to boost the value of the business. Some business owners make the mistake of neglecting maintenance and/or reducing the investment in new equipment. This may impact the value of your business, so it is important to consider all aspects ahead of a business sale.   

External assistance on how to improve your business value  External business advisors can help to improve the performance of your business and boost its value. Their experience of working with many different businesses, enables them to look at your business from a different perspective and an unbiased viewpoint. Having a clear 3-year strategic financial plan that generates profits, releases cash, and grows business value, is paramount to the journey to a business sale. To discuss a Strategic business planning session and how we might be able to help, feel free to book a brief call with our consultant Carl Taylor, where he can go through our process with you.   

In summary, maximising the business value requires careful planning and diligent execution. So, ensure that you consider your options early on in your business exit strategy, and decide which ones are going to work best for your business. Whatever your exit strategy, it is essential that you start taking steps today to maximise your business value – it does not happen overnight.  Selling your business can be a rewarding culmination of your hard work and dedication, and with the right preparation, you can achieve a successful and profitable business exit.   

We always recommend speaking to your advisors on the best steps before making any changes. If you would like to discuss your  business exit planning options, or need some advice on how to maximise your business value, please get in touch. Our tax and business advisors are skilled in such transactions and can navigate the process smoothly.

For more information on how we can help you and your business, please contact us via info@oldfieldadvisory.com or call 02476673160 for support and advice. Let’s work together to grow and strengthen your business.

Please note: This article is provided for information only and was correct as at time of writing (07/11/23). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.