Achieving the best possible selling price for a business can be a nerve-wracking and time-consuming process. However, with a smart strategy and timely expansion of the organization, business owners can make the company’s value more apparent and better position it for a smooth transition.
Here are some tips from our experts:
1. BETTER EARLY THAN LATE
A company isn’t sold overnight. But when should the preparation process ideally begin? “As early as possible, once the decision has also matured emotionally,” says Thomas Schmidt, Division Director of Corporate Finance at Kreissparkasse Köln. He recommends that the owner develop a joint strategy with everyone involved in the process. “Otherwise, it can lead to major disruptions in the sales process,” says Schmidt.
2. GOOD ADVISORS ARE WORTH THE INVESTMENT
The process of selling a company is a complex undertaking with many pitfalls. That’s why it’s worth bringing in competent advisors and lawyers from the very beginning. “I’ve noticed a high degree of openness among business owners, because they often lack a sounding board with whom they can discuss corporate management and strategic direction,” explains Professor Birgit Felden of TMS Management Consulting. That’s why advisors are usually very welcome.
3. ACCURATELY ASSESSING COMPANY VALUE
Industry multiples derived from key performance indicators provide a starting point for an initial company valuation. However, this is only the beginning of the negotiation process, which almost always results in a lower purchase price. “Value is the amount that was ultimately paid for the company,” sums up Peter Harter, Managing Director of SAXO Equity. After all, the company’s value is not the purchase price.
4. DUE DILIGENCE REVEALS WEAKNESSES
It’s not uncommon for owners to try to influence the company valuation in their favor. “For example, by eliminating potential risks for the buyer as part of a seller’s due diligence,” explains attorney Oliver Peters of the law firm Pabst | Lorenz + Partner. Even if the financial statements show strong numbers but there is a lack of innovation within the company, this will be uncovered during the due diligence process at the latest. “It is therefore important that critical issues are identified and resolved before the sale,” says Harter.
5. FUTURE-PROOFING INCREASES VALUE
Before purchasing a company, investors look above all to see whether the business model will remain viable in the future or whether it can be restructured to make it future-proof. Management continuity and investments in digitalization are therefore definite value-adding factors. After all, “A company that isn’t future-proof cannot be sold,” clarifies management consultant Prof. Felden.
