In our mission to advise, inform and inspire business owners and managers we offer these ideas for your consideration. 

Packaged for Sale

Are you managing your business to maximize its value?

Even if you do not have a short-term objective of exiting your business it is always a healthy management strategy to package your business for sale.

That means:

1. making it independent of you, the owner, and
2. ensuring that the performance metrics are attractive and easily understood by an outsider.

Those two objectives will also make the business more valuable and less demanding for you until you are ready to exit.

It essentially means looking at your business as a dispassionate investor instead of the emotionally committed owner.  Step back and look at your business as it would appear to an outsider who is trying to put a value on it.  Remember that the value is based on only two things: 1.) the expected future cash flow and 2.) the degree of certainty or risk associated with achieving the expected returns.

The issues that affect the future cash flows are:

• Product or service plans,
• Pricing and brand recognition
• Strategic and competitive positioning
• Cost control - both variable and fixed
• Asset management - cash, inventory, receivables, fixtures and equipment

Performance tracking and improvements will require analysis of financial ratios compared to your industry, specific competitors, if possible, and checking trends over time.  A future buyer will consider all these factors.

The issues that affect risk for a future owner are:

• Reliability of financial statements
• Dependence on very few customers or suppliers
• Dependence on key employees, especially the owner or family members
• Quality of management, employee relations
• Customer and supplier relationships
• Competitive threats
• Condition of facilities and equipment
• Financial resources and obligations, loans, leases
• Protection of products, intellectual property, trademarks, brand names, territories
• Potential liabilities – product failures, warranty claims, recalls
• Regulatory issues – taxes, legal, environmental, social.

You can enhance the value of your business, simply by working on increasing the returns and reducing these risks.  That usually means making the business more profitable, more stable and less dependent on you. It probably means installing a management team that can deliver the results without your direct involvement.  That's a worthwhile objective that will also make it easier for you to exit at some point and reduce the demands on your time in the short term.

In summary: Packaging your business for sale helps you to make it a better business that is both more valuable and easier to manage.

For more ideas on how we might help you with your business, contact us or visit Business Solutions from DirectTech.

Let us help you work on your business instead of in your business.
 

Del Chatterson

© 2007

For creative, practical solutions that apply to the specifics of your business, please call us at DirectTech Solutions.

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