Forget the ‘magic figure’ when considering selling your SME

1. There’s often little magic in a ‘magic figure’ – It’s all too easy for an owner-manager to dream up a ‘magic figure’ of what you’d sell for if an offer was received. In my experience, this figure is often far from the commercial reality.

2. Remove your ‘rose tinted’ spectacles – Take a long hard look at your business and don’t let emotions stand in the way of reality. SME owners often become far too close to the business, leaving them blind to how negative issues can impact on the value.

3. Play to your strengths – Never lose sight of how attractive a quality customer base, patent protected products and sales opportunities can be to a potential buyer, however small your business.

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4. Be wary of values paid for other businesses – No two businesses are the same which means prices paid for competitors in the past often hold little or no relevance.

5. Plan your exit – SME owners and directors should start planning for their exit up to five years in advance to give time to consider all the options, make necessary changes and maximise the value they eventually get.

6. Plan for the unexpected – Discovering your company is worth much more than expected can accelerate the timing of a sale. Conversely, knowing the value is much less than anticipated, coupled with an understanding of factors behind the value, gives you time to implement an action plan.

7. View your business from a buyer’s perspective – The price a buyer will eventually pay for your business will reflect the value they see in combining your business with theirs. For example, complementary products, cross-selling opportunities, access to new customers, skilled workforce. Understanding what kinds of businesses are buying SMEs like yours, and why, will help you to build a business attractive to buyers.

8. Don’t disregard competitors – Don’t just think of your direct competitors as potential buyers. Companies in adjacent markets or serving a similar client base with different products might be prepared to pay a higher price.

9. The early bird – Your in-depth knowledge about the value and strengths of the business, coupled with time to address any issues, will ensure you maximise chances of securing the best price.

10. Never assume you’re right! Even if you believe you know the value of your firm, never leave it too long to find out if you’re right.