As soon as you start a business you should be thinking about preparing the business for a potential sale.
This doesn’t mean you ever have to sell the business, nor should it distract from running and operating the business; it just means you look at the business through the lens of a potential purchaser or investor throughout your ownership journey.
There are two key reasons for this:
- You never know what the future holds, so – even if you never intend to sell – keeping the business sale-ready means you will optimise value in the case of an unplanned sale. (People who think they can spend three months preparing for a sale create an incredibly stressful situation for themselves and rarely optimise value on exit, in my experience.)
- The same elements that will make your business attractive to a potential purchaser or investor are ones that will help you create value day-to-day.
The second point is key. For example, if you're presenting your business to a potential buyer, they will invariably want to see a strong track record of earnings and evidence of the sustainability of those earnings into the future.
And often an important factor in proving the sustainability of earnings is showing that you have a strong team around you – that you have a well-thought-out and executed succession plan – to mitigate any ‘key person’ risk.
These two aspects of your business – a strong earnings record and a team of trusted and capable staff – will contribute to both impressing a potential buyer in the future, and driving business performance today. It’s a low-risk business strategy that is a win-win.
Next steps
The best preparation starts with reviewing the facts.
If you are embarking on business succession preparation, five to 10 years out from an expected event, our recommendation is that you seek professional, independent advice on business value today and the levers to enhance it over time.
Contact the team at JPAbusiness on 02 6360 0360 or 02 9893 1803 for a confidential, obligation-free discussion to get you started.
