If so, here’s some good and bad news.
First, the bad news. If you’re looking to sell right away, you probably won’t get full value, as it takes a good year of preparation to sell before you actually put your company on the market.
The good news? A lot of businesses have changed hands in the past several years, and there’s a fair amount of money sitting on the sidelines looking for good deals.
Plus, if you actually take the time to prepare your company for a sale, you’ll more than likely jump to the top of a buyers’ short list, simply because most sellers don’t do the proper “prep work” to make the sales process easy and transparent.
So how can you best set yourself up to win when you sell your company? Here are some tips to get you headed in the right direction to receive the best value for your company by the end of the year.
1. Sell your business the way you’d sell a house. Selling a business and selling a house are similar in a lot of ways – and most people wouldn’t ever let people tour their home without making some cosmetic changes and cleaning up before offering it for sale.
The same is true for your business.
You’ll want to run for the next year with good financials, so keep your paperwork up-to-date and document everything. Outline each and every responsibility of each job and include key performance indicators that clearly establish what is expected of each player and group.
Now’s the time to get your “house” in order. Over the next 12 months, give your business a fresh coat of paint and get it tidy.
2. Start your game plan. Seek out and meet two or three business brokers in your area, as the majority of deals come through brokers.
A good business broker is invaluable, and I typically coach companies to go the broker route, as the best brokers do more than justify their fees and can both guide and counsel you through the marketing-and-sales process.
In your initial discussion, you’ll get a better idea of who your potential buyer could be, and how to best position your company to get the most value in the marketplace.
You’ll soon discover there are basically two types of buyers: Those who are looking to buy a fixer-upper and those looking to buy themselves a job.
Ideally, you’ll be looking for an investor who is looking for a business to take to the next level, and who can work with your current team and systems – as those buyers are often willing to pay more for a business that already have effective systems in place.
3. Learn valuations for your industry or category. Another advantage of using a broker is getting solid information about the valuation models buyers will use for your company in your particular industry or category.
Different industries use different multiples. Some use multiples of profit, some revenues, and others cash flow. You can get a good handle on what the numbers for own your business simply by talking to a number of brokers and getting some benchmark metrics.
You’ll also learn where the goodwill in your business is going to come from.
Generally, your database is the biggest asset you have, although you may be in a business where stock and inventory levels will figure into the equation as well. Knowing what you have to work with, or need to focus on, will give you confidence in putting together a solid informational and sales package for prospective buyers.
4. Plan your information and sales kits. Your broker will also guide you on putting together all of your materials in an overall information and sales package, one that includes samples of all of your marketing materials, in addition to an overview of your financials, positional contracts for your team, and any of your management.
Also included in this will be an overview and inventory of your assets, equipment and any physical components of your operations. Buyers will want and need access to this information as part of their own due diligence, and the more information you can provide, the better and easier the sales process will be.
At this point, don’t be overly concerned with disclosing proprietary information that would need to be covered by non-disclosure agreements or non-competes. The objective of what is essentially a sales package is to position and present the company in the best possible light to attract the right kind of buyer for your situation.
5. Prep your team. Finally, strategise, create and then implement a good communications plan with your team and management about your goals and objectives, your desired outcome and your “reasons why” for the sale.
You may also want to seek outside guidance on this process as well, as communicating a sale can be a tricky balance. Under-communicate and you could create a sense of panic in the organisation; Over-communicate and you could do the same.
Your plan should not include only an overall theme or strategy, but also technical details on how passwords and transfers of phone numbers will take place. While these may seem minor, they are the types of items that can cause undue stress or worry as the process of transition winds to a close.
Finally, just be sure you also meet with your accountant or lawyer to make sure what kind of sale is right for you so you don’t pay more taxes than you need to as a result of the sale.
Also, be patient, and realize not every sales process is flawless. On average, one of three deals falls through in the due-diligence portion of the process.
While all of the prep work can seem daunting and maybe even exhausting, the more work you can put upfront into proper positioning and “packaging,” the quicker and easier the sales process will be, and the more value you’ll get in return. Ultimately, that will pay off in creating a true multi-win scenario for you, your buyer, your customers and your team.
What’s The Worst That Can Happen With A Disgruntled Silent Shareholder?
Whether a shareholder brings capital to the business, experience or connections, you need to ensure everyone has the same vision and values.
While we often hear that it can be bad to have a silent shareholder that does not want to play ball, it is not often that we make enquiries about how the governance of a company can be hindered by a disgruntled shareholder.
Most of us assume that as long as they own more than 50% of their own company, they are entirely in control of all aspects of the company and how it is governed. This is not true: Even if you are a majority shareholder, holding less than 75% of all the shares in your company can still result in headaches if a minority shareholder, holding at least 25% of the company, becomes disgruntled and neither participates in the decisions of the company, nor consents to the decisions being made.
What is set out below highlights, among others, why it is so important to give shares in a company to prospective shareholders over a period of time, rather than from the outset. This allows for shareholders to prove their worth without you potentially placing your company in a position where it could be held at ransom for many years.
The illusion of holding more than 50% of the shareholding in a company
- Many people assume that by holding more than 50% of the shares in a company they are free to do with the business as they please. This generally only holds true for basic decisions of the shareholders, such as the removal and appointment of directors. The most important decisions of a company are based on special resolutions. A special resolution requires that shareholders, either individually or collectively, holding at least 75% of all the shares in a company, vote in favour of a specific decision.
- Examples of decisions that require a special resolution include:
- Amending a company’s Memorandum of Incorporation
- Approving the issuing of shares or granting of other similar rights
- Authorising the basis for determining directors’ salaries
- Disposing of company assets
- Mergers and acquisitions.
So, what does this mean for you and your company?
- If you are a start-up looking to raise funds, apart from some exceptions, you will not be able to issue further shares to new shareholders or anyone other than existing shareholders if there is a shareholder that is effectively dead weight.
- Should you manage to vote a new director to the board, you will not be able to determine the basis on which they are compensated (their salary) without a special resolution.
- If you intend to merge with another company, you will not be able to pursue this without a special resolution.
- If you plan to raise money by disposing of or selling most of the assets of your company you will, once again, be prevented from doing so.
Accordingly, it is always best when starting a venture to vest your shares over a period of time. This means that, for example, shareholders are only entitled to have their shares allocated to them after a certain period of time to avoid a situation where you have a dead-weight equity shareholder hindering the governing of your company, and requiring possible litigation to remove them.
There’s More To Team Management Than Leadership
When you’re running a business you need to ensure that your employees are on your side, helping you to make profits. Giving them job security, taking them seriously and treating them with respect, will go a long way in enhancing loyalty and productivity.
The staff that work for you determine:
- How happy your customers are with your business
- The quality of the things that you sell
- The costs that you incur to sell your products and services
- Your risks – the things that can go wrong and how much it costs you
All of these things determine your profitability and how competitive your business becomes. How do you ensure that everyone is on the same side and helping you to make profits?
At work everyone believes that they are getting something (such as money) and are giving something in return (such as time and effort). They are weighing up in their mind “how much am I giving, how much am I getting in return and is this fair?” If they believe that they are:
- Giving too much or
- Getting too little
- Then this is unfair, and they won’t work well (poor productivity – how much they produce).
The manager needs to:
- Know what people are thinking about what they are giving and getting and
- Manage the giving or getting side
- So that people become more productive
In a smaller business you sometimes cannot afford to pay more or provide the sort of benefits (pensions, medical aid, bursaries etc.) that larger firms can and so the staff may be unhappy, not be productive and be on the look-out for something better.
How do you increase happiness without money?
- Job security – knowing that you will still have a job next year – and that you will get paid on time.
- Contributing to the success of the business. If you train staff to have the knowledge and skills to do a better job and you then encourage and support them to do this then they are happier, and you increase profits. If you then share some of these profits with the staff that helped you to make them then everyone wins!
- To be taken seriously and treated with respect. If you do this then staff are happier, and they will also treat your customers with respect.
- To be part of the team. You can often do this by having a regular briefing on what your plans are and discussing ideas. Because staff are doing the actual work they will often have good ideas and then will be motivated to implement them – it was their idea after all!
Staff leaving you all the time is a can destroy significant value. If you implement the strategy above, you will have happier staff that are more productive and a more profitable business.
Jeff Bezos Reveals 3 Strategies for Amazon’s Success
One of the richest men in the world shared his leadership tips for running a company.
“It remains Day 1.” That’s how Jeff Bezos, founder and CEO of Amazon, signed off in his 2018 letter to shareholders. He’s been propagating the “day 1” mantra for decades, and it’s meant as a reminder that Amazon should never stop acting like a start-up – even though the company now boasts more than 560,000 employees and more than 100 million members of Amazon Prime, the company’s paid service for free shipping on select items.
Here are some of the most useful nuggets of wisdom Bezos shared in his letter and during a recent onstage interview:
1. Standards are contagious
Bezos says he believes high standards are teachable rather than intrinsic. “Bring a new person onto a high standards team, and they’ll quickly adapt,” he writes. “The opposite is also true.”
If a company or team operates with low standards, a new employee will often – perhaps even unwittingly – adjust their work ethic accordingly.
He also says that high standards in one area don’t automatically translate to high standards in another – it’s important for people to discover their “blind spots.”
Try making a list of your duties, then ask trusted colleagues to tell you which responsibilities are your greatest strengths. If certain things from the list don’t come up during the conversation, it might be useful to think about how you can up your personal standards in those areas.
2. Set clear, realistic expectations
If you’re looking to raise your standards in a particular area, the first course of action is to outline what quality looks like in that area. The second is to set realistic expectations for yourself – or for your team – regarding how much work it will take to achieve that level of quality.
Exhibit A: You won’t find a single PowerPoint presentation at an Amazon company meeting. Instead, teams write six-page narrative memos to prepare everyone else for the meeting.
Bezos says the quality of the memos vary greatly because writers don’t always recognise the scope of the work required to reach high standards.
“They mistakenly believe a high-standards, six-page memo can be written in one or two days or even a few hours, when really it might take a week or more!” Bezos writes.
3. Stay involved with the people you’re serving
Whether you’re selling a product or service, it’s a good idea to make sure you never lose touch when it comes to the people you’re serving – no matter how high up the ladder you climb.
Bezos says he still reads emails from his public inbox (email@example.com) as a way to keep his finger on the pulse of what’s happening with Amazon customers.
He says he believes focusing on what customers are saying is much more important for success than focusing on what competitors are doing, and he often compares customer feedback to company data to see where they misalign.
“When the anecdotes and the data disagree,” Bezos said at a recent leadership forum at the George W. Bush Presidential Center, “the anecdotes are usually right.”
This article was originally posted here on Entrepreneur.com.
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