One thing is certain, there will come a time when you will transfer your business. Sometimes this happens within the family, but most of the time an external party will take over your business.
Don't let it overwhelm you when a buyer suddenly knocks on your door, nor wait until a sale becomes necessary. Stay in control, where there are some topics you can always start working on already.
Management Information
A mature organization has a good Management Information System. This consists at least of monthly figures, budgets and KPIs that are managed. Ideally, this is automated as much as possible using PowerBI, for example.
The more automated this is, the stronger this comes across in a potential acquisition process. This gives confidence in monitoring and steering.
Full management and executive team
A full management or executive team is essential in an acquisition. This importance increases further if the exiting shareholder does not want to remain involved (operationally) for long. Ideally, this team will have a mix of experience and talent that will enable the company to continue to operate fully after the transfer.
Preferably there is a good balance in which there is also a "crown prince(s)" who can eventually grow. In the perfect mix, the existing team should last 7-10 years.
Working Capital Management
In many family-owned and SME businesses, active working capital management is regularly not taking place. From a relationship perspective, creditors are paid promptly and debtors are not always served notice. There is also room to buy extra stock because it is 'convenient'. Towards an acquisition, it is good to pay extra attention to this, without losing sight of the DNA of the company.
The reasoning behind this: the business will be transferred with an average working capital, which usually looks at the past 12 months. Cash that can be structurally released from the working capital will accrue to the seller. So every euro that is structurally released from this will accrue to the seller.
Sustainability
Sustainability is more than a concept and is getting more attention in acquisitions. This will only increase in the coming years. If you have not yet actively addressed this, the advice is to take the first steps. By doing so, you not only comply with the increasing legislation and regulations, but you also offer yourself a competitive advantage and contribute to value creation.
Clean up your financial statements
Are there any special features on the balance sheet? Think of loans to third parties, Current Accounts, provisions, etc. Are there any details in the income statement? One-time income and expenses, investments that can be capitalized, etc?
It can be useful to perform an (extensive) analysis early on to gain insight into these issues. Part of this analysis can also be a value indication of the expected sales proceeds in the market. It also often makes a bookkeeping investigation easier, because relevant issues have already been identified.
Business Structure
It is a good idea to look at the company structure. Are there different divisions/activities and how do they relate to each other? Are there any tax or legal issues involved? If activities are going to be split up: which staff departments are used by the activities and what is the consequence of splitting up activities? For example, will there be activities without a finance or marketing department? How can this be filled in? How is housing arranged? Are there other mutual supplies and/or interests, etc?
A buyer will have a particular interest in a mature business in which all departments are secured.
Requirements
As a seller it is good to think about the wishes and demands you have for a possible transfer. Here it is good to have a critical conversation with each other because it is about the real wishes and demands. Based on these wishes and demands a selection can be made for potential takeover candidates.
The wishes and requirements are also important to define an appropriate acquisition process, which suits the business and the entrepreneur(s). The requirements here are basically the breaking point for the entrepreneur, with the wishes giving a certain amount of flexibility during the sales process.
In short, to get your business ready for sale, you don't have to sell your business yet. Start working on the above topics and you will have a good basis for when the time comes.
