Maybe you’re looking to offload a business you picked up solely so you could flip it for profit, or maybe the time has come for you to move on from a business you built from the ground up. Whether you’re changing direction or simply trying to get away from a venture that isn’t performing as you’d hoped, the objective is the same: sell for as much as you can get.
And when it comes to the art of the sale, it’s important to remember that everything remains negotiable until the deal has been agreed and money has changed hands. As long as the business remains in your possession and under your control, you have extra time to raise its perceived value and squeeze a little more money from the situation.
In this article, we’re going to review some ways in which you can increase the value of a business right before you sell it, ultimately resulting in a better deal. Let’s begin.
Extend supplier relationships
Businesses are almost never fully independent in their dealings. If you sell third-party products, then you’re reliant upon the stock suppliers, and if you sell your own products, then you’re reliant upon the delivery company (or companies). If you simply offer a service, well, you still depend on utilities — without stable electricity and internet access, many companies couldn’t get anything significant done. Then there are leasing concerns to be taken into account.
Quite often, someone looking to sell a business will allow arrangements to draw to a close before they sell, reasoning that a new owner will want to put their own stamp on the situation by arranging their own deals — but this is the wrong way to go about it. If a prospective buyer intends to keep the business running during the exchange (and they likely will, regardless of their ultimate intentions), then they won’t want to be required to get involved with making supply deals while the ink on the handover paperwork is still wet.
Instead of letting the deals end, get extension commitments to allow the new buyer a significant grace period. Since you’ll be passing the ongoing bills to them, it won’t cost you anything more, and it will add meaningful value to your business — not only will it demonstrate that you believe in the stability of the business model enough to support it for a longer time, but it will also lessen the already-intimidating short-term workload that a buyer would ultimately face.
Document your vital operations
Procedural knowledge is incredibly valuable because every business operates slightly differently. Two companies doing roughly the same thing in an industry will no doubt go about their business in very distinct ways. What’s the chain of management? Who’s formally responsible for each element of the daily routine? How does the machinery work? Everything important about how your business functions must be written down so that someone new can get up to speed more quickly and easily.
For instance, consider that I’m writing this piece at the moment. If I were to swap places with someone writing a different piece on the same topic, it would take me quite a while to determine how to continue it. I wouldn’t know what they’d planned to do with it, why they’d made the choices they’d made, what research they’d done, etc. To finish it with any degree of efficiency, I’d need some notes from the original writer explaining all of the above.
When you know you’re going to sell the business, start making comprehensive notes on all the activities and information sources that go into the basic work. In the process, list down any quirks that someone new couldn’t anticipate. Maybe your photocopier only works if you leave it powered off overnight, or your office has a very awkward lock. The more open you are about minor details, the more confident someone will be that they know what they’d be buying.
Produce polished brand guidelines
When a prospective buyer looks into an existing business, something that they’ll pay close attention to is the value and potential long-term viability of the associated brand. Consider a company like Coca-Cola — if you take away the product, the infrastructure, the money, and the contacts, you’re still left with a valuable entity in the form of the brand. The name itself carries a certain cache built up over years of corporate and marketing success.
Now, I’m certainly not suggesting that any time should be spent trying to emulate Coca-Cola. Those levels of reach and investment are untouchable. What I am suggesting, though, is that you outline a consistent, useful and meaningful set of brand guidelines. The goal of this is to ensure that any potential buyer — no matter how unfamiliar with the industry — can easily understand the nature and appeal of the business.
At a minimum, a good set of brand guidelines must include the following:
- The unique selling points (USPs) of the business.
- A promotional introduction to the business.
- Preferred fonts, including sizes, headings and subheadings, capitalization, and styling.
- A robust color scheme with various combinations that can be used for different media.
- The tone to be used for copy (casual, friendly, professional, self-effacing, serious, etc.).
- A high-quality and high-resolution logo (possibly in multiple configurations, and with the right size for web and print).
- Buyer personas. What do prospective customers need? What are they looking for?
Assemble all of this information into a polished download-friendly document with a table of contents (if you’re unsure how to create a suitable file, you can design your ebook with software like this), and get it professionally printed if you have the time and can get it done without spending too much. If the business you’re selling has a physical location, you’ll invariably need to show prospective buyers around at some point, and having an excellent brand document to hand them with greatly improve their perception of the operation.
Convince top employees to stay
This obviously doesn’t apply if you’re selling a business you ran solely by yourself (or that you purchased staff-free), but if you’re looking to sell a business that still has employees, don’t just let them leave without putting up a fight unless you don’t think they have anything to offer. Everything we’ve looked at so far — you branding, your supplies, and your procedures — will be easier for a new owner to deal with if there’s an employee there who has been with the company for some time and knows the setup.
People aren’t typically going to want to stick around as part of a business that doesn’t have a future, but you can convince them to give it a shot. Persuade them that the business is going to survive and thrive under new ownership, and that they’ll be a vital part of that success. Naturally, you should also provide a more significant monetary incentive (though make sure that you update your selling arrangement to reflect that added cost).
Something you might like to do is allow any interested parties to speak to your existing employees and thus get some further information about the state of the business. Don’t do this if there’s an employee with an axe to grind, of course, but if they’ll have good things to say, it could do a lot to improve the perception of the business.
Try these tactics once you’ve decided to sell a business. You should be able to make some significant progress in under a week, and leave possible buyers with a much stronger impression of your business — thus allowing you to charge more for it.
About the author
Kayleigh Alexandra is a content writer for Micro Startups — a site dedicated to supporting startups and small businesses of all shapes and sizes. Visit the blog for the latest entrepreneurial news and side hustle tips. Follow us on Twitter: @getmicrostarted.