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| Sell or Finance Companies |
The other day, a first-time entrepreneur asked me excitedly:
“when should I actually plan about selling my company”? Though for a newly-started
venture, it is quiet a distant dream but the fact is, you should start planning
for the day right from Day 1 of your business. Whether you sell or finance
companies is all up to you but it is very important to prepare your business
for that moment right from the beginning.
Here are a few tips that you should follow if you are
planning to sell or finance companies in the near future:
Place Your Financial Statements
In Order
Financial statements very strongly project your company’s
future performance. These are really helpful for a buyer to evaluate the future
prospects of the business before buying it. Try getting it prepared or verified
by a professional accountant so that should give your business more
credibility. Even your investors would love to see a great combination of a
unique business plan and well-kept financial statements.
Keep Your Business Growing
The best time to sell or finance companies is when they are at
the peak. So try to grow your business with an aim to make it attractive enough
in front of your potential buyers or investors. The venture capitalist usually
prefer to invest in the growth stage businesses and even buyers give more credibility
if you can show more sales and return prospects.
Determine The value
of Your Business
When it comes to valuing your business for sale, both
tangible and intangible assets combine together to help you come to a
conclusion. The intangible assets such as your employees, skills and knowledge,
customer relations and other things play a key role in determining the
company’s actual worth.
There are broadly three different approaches to determine the
value of a business: Asset-based Approach, Income Approach and the Market
Approach. Being an entrepreneur, if you feel that your investment capital is inadequate,
it becomes all the more important to evaluate the true value of your business. This
showcases all the strengths and weaknesses of your business and helps you to
work on the negative issues as soon as possible.
Try To Maximize Your
value
Now this is very closely related to the above point. The more
you maximize the value of your business, the easier it will be to find a
potential investor or buyer and it is possible only when you do a proper
business valuation. How to maximize your business value? Typically, those
companies that focus on their core competencies rather than moving to different
directions are far more reliable than those who do just the opposite. Identify
the exact mission, vision and future objectives of your company and do not let
your focus deviate from them. Also, try to reduce the customer concentration before
a sale. Usually, a buyer prefers to invest in a company where a small number of
customers generate a large part of the company’s revenue.
Identify Your Potential
Buyer
When it comes to identifying the right buyer for your
business, you have to think much more than just the ‘pricing’. Your buyer can
be anyone, your rivals, employees, customers or even your friends and relatives
and everyone may approach you with different objectives based on which you will
have to pitch your business to them. You also have to ensure that your buyer is financially efficient
enough to invest in the business. You can hire a broker or an investment banker
to verify your buyers which they will do by reviewing the buyer’s equity, fund-strength,
source of fund and his/her legal credibility..
If the deal is among family members or friends and
relatives, you may not need any agent but if the buyer is from some other section,
you may consider hiring a professional to carry out the deal.
Think About Management
Succession Before You Leave
Make sure the business is able to run on its own even when
you have left the company. In case you are the sole master in every single department,
how will the buyer run the company once you leave? Before you leave, train the
person next to you in the company whom the buyer can rely on after you. You
must delegate key responsibilities, especially in departments connected to
customer relations and revenues. The buyer will always ensure that the business
runs successfully even without you so try to take it to that position.
Conclusion
Try to remember all the above points before you plan to sellor finance companies in future. Your newly-started business will give you
enough time and opportunity to work on these aspects. If you really have a
unique business plan with a sizable and scalable market on target and a highly
efficient management team, it won’t be that tough to find the right buyer or
investor.
Also, there’s a better way to get easy access to your
potential buyers and investors without wasting much time. Try to become a
member of an intelligent network like Merger Alpha. It’s a common platform that
brings together buyers, sellers, investors and financial advisors of the
startup ecosystem. If you want to know more about this community, feel free to
visit http://mergeralpha.com/.
Good Luck!
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