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Preparing To Sell A Company – Non Financial Issues

MC900438796 (2)When it comes to estimating the value of your business recent financial performance is only one of the factors to be taken into account.

The financial performance of your company will put it into a range of values for a business of its type. Where it sits in that range, and even if it can be sold at all, will be determined by a host of non-financial issues. These issues impact the buyer’s view of whether the current level of profits can be maintained in future years.
 
What Are The Non-Financial Issues That Impact The Value Of A Company?
 
There are any number of non-financial elements that can play into a buyer’s perception of your business as a well-rounded concern with a future. The next few paragraphs tackle some of the issues we find most often impact value, or in the worst case make a business a challenge to sell at all.

Customers

Customers are fundamental to the health of any business, and in particular buyers will be concerned with the spread of your customer base and how often they buy from you. A business that is reliant on a small number of customers will not be viewed as favorably as one with a wider reach. Any customer making up more than 20% of turnover will be a source of concern. Businesses reliant on constantly originating large new projects, or where customers order sporadically, will not sell on high multiples of profit.

Marketing Profile

The way in which your company presents itself and its products and services will be an important concern. Are you using the most suitable marketing platforms for your market sector? Are your marketing materials up to date with a contemporary look and feel? Nothing gives a clearer image of a dynamic, healthy business than good presentation.

Management Systems and Reporting

Well organised companies have robust internal systems usually embedded in their information technology and reporting systems. Are your systems and procedures such that the loss of a key employee will not unduly disrupt the business? Can you quickly generate reports on order books, stock profile, customer and product profitability? Lack of controls will plant a doubt in a buyer’s mind about the sustainability of the business.

Contacts Network

Most businesses have a spread of customers, professional contacts and referral partners that generate new customer opportunities. Make sure your contact list is up to date and remove any names that have gone stale. Is your business over reliant on any of the contacts? Are any of them based on personal relationships that would be difficult to pass on? An out of date list, or an over reliance on personal relationships, will plant seeds of doubt in a buyer’s mind.

Suppliers

Review your supplier list from major items such as raw materials or wholesale purchases, to smaller purchases such as office stationery, photocopiers and computer peripherals. Are you still receiving the best deals possible? Is the business heavily reliant on a single supplier, especially one that owns a resold brand? Are there any supply contracts coming close to renewal dates, or with onerous change of control clauses? Problems in these areas may make a business difficult to sell at all.

Staff

A buyer will want to be certain that you have the right number of staff with appropriate qualifications and a good spread of experience. Do you need to adjust staffing levels before the sale? Do you have a large number of employees approaching retirement age? Everyone should be suitably qualified for their particular role, ideally with suitable training schemes put in place. Buyers will be concerned that unqualified staff may not be able to sustain the business after your departure.

 

If you are interested in finding out more about these and other issues relating to the sale of a private company one of our business sale experts would be delighted to talk to you in complete confidentiality. Click CONTACT ME to book an initial phone conversation or call us on 01604 432964.

 
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