I was visiting a client in the south of France last month and on my way back, in the plane, I was seating (as it is too rarely the case) next to a very sympathetic passenger who was willing to chat a little bit. I had a wonderful trip back to Belgium discussing some business-related issues with this entrepreneur who was thinking about selling his company. The company was apparently in good shape, made good profits and had a robust margin, and was active in an unusual niche since it was designing and selling crosses to manufacturers of coffins. Not the most usual industry to make money, right?
The entrepreneur, having discovered in the conversation that my company was also advising customers on how to sell their company, questioned me about his very company and we discovered a few mistakes that would impede him to sell at a good price.
Here are a few tips that you may want to keep in mind when the time will come to sell you “baby”
1/ processes, processes and more processes
The main problem of a potential buyer will be to make sure that the business will keep growing and that targets will be met. In the absence of written rules, which help automatize internal processes, the business continuity will be impeded after the business has been taken over. When it depends too much on non-written rules, a business will suffer once its owner / manager has left.
2/ what’s your competitive advantage ?
Here’s an advice I give to 99% of entrepreneurs. You’ve been managing your company for a certain number of years but have you thought about what makes your company so strong and unique in the eyes of your clients? You may think it’s basic textbook marketing but it does work and it is simply not practiced in SME’s.
This being said, you may have an idea already of what makes you so attractive. Don’t stop here. Put this on paper, check that your assumptions are right and use them when looking for new clients to make sure that it works. The next step, when you’ll have found where your strengths are, will be to make it known to potential investors. They will love hearing about competitive advantage and see of professional you went in working on your marketing. Actually you should always make sure you use the same language as your investors. Chances are big that the latter are professional and highly educated. They will have expectation and the best way to make sure that they love you is to tell them what they want to hear in the language they know best.
3/define, measure and prepare your KPI’s
Define and measure the evolution of you most important KPI’s. I’m not here to teach you how to compute your ROE, ROI, … However I’d like to draw your attention on the importance of non-financial indicators which are as important as financial ones. The growth perspectives of a business will indeed depend on marketing indicators such as loyalty rate, word-of-mouth rate in the acquisition of new clients, acquisition costs.
Had you at least thought that such indicators may help you, one day, sell your company? And if it is the case, what have you done to actually define and measure (the hardest part of the job) those indicators?
My take:
You’d better get prepared if you intend to sell your company. It is the dream of most entrepreneurs but very few realize that the preparation should start well in advance to maximize the price you can expect. I think that two years is a minimum to start organizing for the sale, three years being in my opinion a sufficient period of time for any SME.
Posted in Strategy.
