19 Aug How to lift your business sale price five fold
Most owners undersell
Many owners we meet actually undersell their business because they had not thought far enough ahead before wanting to sell it. Partly this oversight is due to owners being unaware of what really drives up a business sale price.
Do you want to achieve a premium price for all the years of work you have invested in your business?
Assuming the answer to this question is yes, then you might like to know that TBD’s Hoshin Kanri prrogramme can significantly increase the value of your business. In general terms what you have to do now is start by carrying out out basic improvements. But importantly, at one and the same time, you have to strengthen the competence and self-sufficiency of your management team.
This sort of longer term pre-sales preparation embeds “real value” within the business.
The four key sales factors needed to maximize your business sale price
When it comes to putting your business up for sale you can optimize your capital value with 4 key business sale price factors:
Make yourself dispensable. Nobody wants to buy a business that then implodes because of the departure of the previous owner. This aversion also applies to any other key persons who are or appear indispensable. From the buyer’s point of view there is always a risk that these key workers will up and go when the new regime takes over.
This means that you must have a robust, experienced and self-sufficient management team able to give any new owner the confidence that the profitability of your business is sustainable after your departure. And without your personal intervention. This first factor alone helps reduce the buyer’s risk and often increases the price they are willing to pay.
It really is best if you have a clear track record of remorseless performance improvements. The need is to demonstrate that your existing team has a proven ability to identify both waste and opportunities and translate this into workable action plans to improve profitability.
And leading on from both factors one and two, the existing management needs to have ongoing operational action plans already in place designed to make specific improvements and grow profitability. The all-important point here is that these action plans need to have the enthusiastic buy-in and commitment of all the staff.
The company needs to have a well-thought through long term strategic plan. This plan must identify all the risks and opportunities confronting the business and have the buy-in of all the staff. Importantly the planning needs to be integrated into a minimum of three-year financial forecasts. These forecasts must detail the precise financial implications of each projected performance improvement.
All other things being equal, if your business has these four key sales factors in place you will be better able to attract a potential buyer. The eventual business sale price they pay will reflect this. (See our case study about capital growth)
Timing is of the essence
But you do need a run up to all this. The time to start your business sales process is at least two years before you are thinking of selling.
Quite simply, if you leave things to the last minute you will depress the value of your own business considerably. Is this the sort of return you want after all the years you have invested in it?
For a successful disposal you need to demonstrate the future potential of your business.
TBD offers a comprehensive Hoshin Kanri programme. This is designed to help you build the four key sales factors into your business to help you achieve the best price when you come to sell on.
Hoshin Kanri will show you how to:
- Introduce team-planning methods that create improvements across every area of your company and simultaneously impact all four profit drivers – increased sales volume, increased sales prices, reduced unit costs and reduced overheads
- Align strategic planning with both the business improvements and existing operations.
- Develop the corporate structure to ensure maximum optimization in the event of a disposal
Hoshin Kanri aims to:
- accelerate change and innovation
- drive out inefficiencies and minimize waste,
- stimulate performance improvements and exploit opportunities
- develop your management team and of course
- increase your profits
Would you like to grow your business sale price by five times?
Using Hoshin Kanri’s unique ability, to improve all four profit-drivers all at the same time, has a powerful effect on profitability. The compound impact of improving all four profit drivers combined with the alignment of all improvements with long term strategy will greatly enhance your business sale price.
What is your business ultimately worth to you? What would it feel like to you if your business was worth five times more than it is now? (Read case study) If you are contemplating selling your business in the not too distant future start acting now. Find out more about our Hoshin Kanri process. Contact Jeremy Old for an informal chat on 0845 0945 819 or email [email protected]
In this groundbreaking book, the author explains the psychological reasons why collaborative management methods such as Hoshin Kanri are so much more successful than conventional top down command and control.
Jeremy is qualified to MBA level, with a post-graduate diploma in psychotherapy.