At Fiducia Partners we regularly review businesses to assess their potential and whether they are worth investing in or buying. And while there are many businesses with ‘good bones’, if they have overly complicated financial structures or too much reliance on the founder, we often walk away.
Based on some of the things we look at when assessing a business, here are six pieces of advice to entrepreneurs. Of course, not every entrepreneur intends to sell their business, but one day it will need to be passed on and running a business ready to sell will make for a much smoother succession. By keeping this advice in mind, you can ensure the best chance of a successful sale in the future, or indeed a smooth transition to successors.
1 Focus on building
Despite the subject of this article, the first thing entrepreneurs need to focus on when building a business is not to focus on selling. The majority of your efforts should be focussed on building a great business. If you do this, you won’t be short of potential buyers when you’re ready to sell, but you won’t attract that interest if the business is not thriving.
2 Think about scalability
Second, keep in mind that investors buy businesses they think can be scaled up once they have taken control. This means the business needs to be well-run, with pristine, up-to-the minute accounts, autonomous management and an adaptable product or service.
3 Keep it simple
Third, simplicity is key. If you have lots of investors or shareholders with different ideas, this could be a problem for potential buyers. By keeping financial arrangements straightforward and ensuring company and personal finances stay separate, buyers are less likely to discover complications that affect their decision to buy.
4 Business success shouldn’t depend on you alone
Fourth, you need to ensure that the business does not rely on you to succeed. Any potential buyer will want to know that once you are no longer involved, the business will continue to thrive without you.
5 Profit and revenue
Fifth, build your bottom line and revenue streams. Buyers are particularly attracted to recurring revenue because it offers some consistency and becomes easier to budget income. If you can demonstrate growth, profitability and reliable returns, you will have plenty of interest when it comes to selling.
6 Build a strong brand
Sixth, there is nothing better than a strong brand. A company with a good image and strong brand value is worth more than a comfortably profitable company with an underdeveloped image or brand. Intangibles often make the difference between an ordinary company and one that is sought after by numerous buyers.
In truth, building a business you can sell is not overly complicated, but it does take planning, consistency and effort. We hope you found this advice helpful and please do contact Fiducia Partners if you are seeking a buyer for your business or are seeking an introduction to potential investors.