What Is the Most Convincing Tool for a Business’ Buyer?

45% of owners would sell their business tomorrow for the right money. Unfortunately in any 12 month period only 20% of businesses on the market actually sell and businesses that go straight to market sell for only 70-80% of the original asking price. The main reason for failing is due to lack of planning, research and organisation.

There is so much more that goes into selling a business than putting an ad in a “business for sale’s database” and having the right lawyer and accountant advising the owner.

A lot of people do just that without any thought to how the business is going to attract the right buyer.

Before embarking on selling a business, several things must be taken into consideration. Research and analysis must be done, and a business plan must be prepared. A business plan is required if you are selling a business because the potential buyer wants to know exactly what he will be investing in, and that he will get its money back. Business buyers are taking a risk so they want to be assured that your business has at least a 90% chance of being successful without you at the helm. A well written business plan will outline every aspect of the business and give the buyer a clear picture to help them in their investment decision. It will also help you to set realistic goals and objectives, and set yourself and your business up for a successful transition. This is a document that should be updated quarterly or at least when circumstances change.

Your business plan should include:

Business Plan

1. The Executive summary

In this section you should cover briefly the company mission statement and a summary of your visions and plans of what direction you want your business to take. It should not exceed 3 to 4 pages.

2. The Business Background

This section should include:

  • The business activity in broad terms
  • The location of the business. If the business has an on-line presence, describe the logistic to order and deliver products or services on-line.
  • The kind of legal business organisation: Self-employed, corporation, non-profit, Limited Company, Partnership…
  • The name of shareholders and their respective share of ownership in the business.
  • A summary of the next 3 years financial projection.
  • An organisational structure such as an organisation chart.
  • A description of the management of the company.
  • A description of other business personnel.
  • The employment policy.
  • The main external support organisations, partnerships? What role do they have in the business success?]

3. Aims and Objectives

This section should explain in deep details:

  • The company’s mission.
  • The main strategies and objectives for the next 5 years.
  • who is the competition, and what your sustainable competitive advantage is. If your business is a restaurant, what product or service are you offering to your customers that other restaurants in your area cannot offer?
  • The threats of new entrants on the market and the threat of substitutes for your services and products and how you address those issues.
  • The powers of suppliers, how your company builds and maintains vendor relationships. How the company conducts supply chain management, detailing how the chain of suppliers of your merchandise be managed.
  • The power of buyers of your products services, and your distribution channels. What the pricing strategy of your company is. What kind of customer relationship management your company has and how you develop customer loyalty.
  • Your debt situation and expected effect of loan or investment.

4. Products and services

This is where you have the opportunity to give a complete overview of:

  • The business and the products or services that are offered
  • How you differentiate your for each of your  products or services from other similar products and services in your market
  • The demand for your product or service, and any additional products or services that your company is offering.

5. A  SLEPT analysis

In the introduction give a short description of the Social, Legal,   Economic, Political, Technological environment of your business. For each element of  SLEPT explain the risks they represent   to your business and how you are mitigating them.

6. The Market

Describe in great details:

  • The industry, the market and demographics, including the market for your product or service.
  • Your target market , if that market is weak or strong, and if you found a niche in that market.
  • The nature of the market , is it saturated, or is there room for more of the product or service? Is there any possibility to expand, replicate the business in other parts of the world?
  • How  realistic your  estimate of your market share is.

7. A detailed SWOT analysis.

SWOT stands for strengths, weaknesses, opportunities and threats. Strengths and weaknesses are internal. Opportunities and threats are external.

Appendix A: Detailed financial plans :

This section should show:

  • A five-year financial projection that shows net sales, net profit, net profit margin, asset turnover, return on assets, cost of goods sold, variable and fixed expenses, inventory, accounts receivable, current assets, fixed assets, total assets, other current assets and gross margin.
  • A five-year cash flow projection.
  • A five-year financial projection that outlines income and expenses.
  • You will need to plan and show how your business will survive during slow times, and how it will pay its bills during rough periods. A contingency plan is a smart plan, and can save you a lot of grief if something happens to your business such as fire or flood, illness or death of a key member of staff or business owner. A potential buyer would not want to lose business because of an unexpected catastrophe, so planning ahead is crucial to the health of the company and will attract a premium from a potential buyer.

Appendix B: Management Team CV’s

You will need to include for each member of the management team their profile and skills, a brief career history,  their major accomplishments

Appendix C: Business model overview

Our partners at Keyso Global are using the following 9 boxes to help companies reviewing their business models

9 box business model

Appendix D: Risk assessment of the business

Review the risks associated with each driver of your business’ potential growth and how you will mitigate them.

Selling a business is a lot of hard work. The overall success of a smooth business transition to a new owner depends on the groundwork that you lay in to prepare your succession and protect the growth potential of your business. Your hard work will pay off when you have started a new phase of your life, customers continue to patronize your business, the company’s books show a profit, your employees have kept their employment, and you are able to afford a comfortable life after business thanks to the net proceed of the transaction.

Are you curious about how sellable your company is and what you would need to tweak to sell it when you’re ready? Then it’s time to get your Sellability Score via the questionnaire on our website. It takes about thirteen minutes and your responses are kept confidential. Complete the The sellability Score Test Now!

If you would want to know more on how to transition out of your business and would want to explore what you should do please do not hesitate to call Jean-Bertrand de Lartigue on +44 1656 766 363 or e- mail him at jb@macint.co.uk

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