Let’s start by simply turning the question around: What do you think you’d have to do to keep the proceeds from the sale as low as possible? Well, that’s quite simple: all you have to do is start doing absolutely everything yourself from now on—so that everything depends on you, stop all investments, forgo marketing efforts, neglect your employees and their training, place no particular value on customer and supplier loyalty, and more or less not care about the service and quality of your products.
You stopped developing your products some time ago anyway. After all, it’s harvest time. Things will go well for another five years; after that, it’s the buyer’s problem. Of course, your products are still selling well—after all, you want to continue making a good living from the company—but whether anyone will still be interested in your products in 10 years isn’t that important to you, because by then you’ll have long since sold your company for a hefty sum. This is precisely what a prospective buyer will view in a completely different light.
Company Value: Putting Yourself in the Buyer’s Shoes
Their key question will be: Will the business model continue to be successful in five to ten years, and will the company be able to recoup the (high) purchase price?
What is important to the prospective buyer1 so that they will answer this question unequivocally with a “yes”?
1. The company has a proven track record of successful operations in the past. This is precisely the case when…
…the processes are efficient.
…the company has a clear profile (ideally, unique selling points), for example as a leader in quality or innovation.
…cost structures have been regularly reviewed and improved.
The simple rule here is that the purchase price paid is always directly proportional to the profits generated. The higher the profits, the higher the purchase price tends to be—and, incidentally, the greater the willingness of banks to finance it.
2. The buyer has a high degree of certainty that what has worked in the past will continue to work in the future.
Here, the buyer primarily sees the risk that the “departure” of the entrepreneur could jeopardize customer or supplier relationships, or that necessary technical knowledge might be lost.
Reassure the buyer by ensuring that your customer and supplier relationships are documented in writing, that employees can work and make decisions as independently as possible, and that the company and its employees have demonstrated in the past that they can respond flexibly to change —because sooner or later, a buyer will seek to implement changes, if only because markets are changing at an ever-faster pace.
Conclusion
When you begin the sales process, your company should be in such good shape that you yourself would say: “What a great company—I’d want to run it myself!” The risks of a takeover are manageable, and the prospects for the company’s continued positive development are good to very good.
[1] It is very important to us to emphasize at this point that this explicitly includes female successors as well. We see a significant need for improvement in this area and a great opportunity for women.
