(Article) 6 little things that make a big difference to the value of your company - Bill Black

6 little things that make a big difference to the value of your company

 

With the Sochi Olympic Games that took place last month, it is interesting to reflect back on some of the big events of the 2014 Olympic Games.

 

In Bobsledding The Russians edged out Latvia and the United States, who finished second and third, with an overall time just .09 seconds better than Latvia. Zbigniew Brodka of Poland  won the Men’s 1500m Speed Skating  by .003 seconds, and the Men’s 1000m Speed Skating was won by only 0.04 seconds.

 

In racing, tiny fractions of a second can be lost in the tiniest of miscalculations.  And when it comes to selling your business, markets can be equally cruel. Get everything right, and you can successfully sell your business for a premium. Misjudge a couple of minor details and a buyer can walk, leaving you with nothing.

 

Here is a list of six little details to get right before you put your business on the market:

 

1.    Find your lease. If you rent space, you may be required to notify your landlord if you intend to sell your company. Read through the fine print and ensure you’re not scrambling at the last minute to seek permission from your landlord to sell.

 

2.    Professionalize your books. Consider having audited financial statements prepared to give a buyer confidence in your bookkeeping.

 

3.    Stop using your company as an ATM.  Many business owners run trips and other perks through their business, but if you’re planning to sell, these treats will artificially depress your earnings, which will reduce the value of your company in the eyes of a buyer by much more than the value of the perks.

 

4.    Protect your gross margin. Oftentimes, when leading up to being listed for sale, companies grow by chasing low-margin business. You tell yourself you need top-line growth, but when an acquirer sees your growth has come at the expense of your gross margin, she will question your pricing authority and assume your journey to the bottom of the commoditization heap has begun.

 

5.    If you’re lucky enough to have formal contracts with your customers, make sure your customer contracts include a “survivor clause” stipulating that the obligations of the contract “survive” the change of ownership of your company. That way, your customers can’t use the sale of your company to wiggle out of their commitments to your business. Have a lawyer paper the language to ensure it has teeth in your jurisdiction.

 

6.    Get your Sellability Score. Click here to Take 13 minutes to answer the Sellability questionnairenow. You’ll see how you performed on the eight key drivers of sellability and you can identify any gaps you need to fill before taking your business to market.

 

Like competing in the Olympics, selling a business can be an all-or-nothing affair. Get it right and you will walk away a winner. Fumble your preparation, and you could end up out of the medals.