Selling a business can be necessary yet tricky undertaking. Support services firm Bankhall has outlined five steps advisers can take to maximise the value in their firm before selling up…
According to Bankhall, advisers should take at least two years to plan their exit to make it as smooth and clean as possible, and maximise the return they get from selling.
Too often advisers underestimate the work involved and the steps required to prepare their business for sale, the firm said.
Head of bespoke solutions Linda Preston-Todd said: "Many business owners are deeply involved in the day-to-day operation of their firm and conducting meetings with clients. This is completely understandable, but what we regularly see as a result is that exit planning is often left to the last minute and this can be detrimental to the firm's interests."
Preston-Todd recommended advisers included an exit strategy within their long-term business plan. By making this an objective and reviewing it on a regular basis, firms will ensure they are on track to achieve their long-term goals, she said.
In particular, she outlined five areas for exiting firms to carefully consider and the questions they should be asking themselves:
1 Understand your goals and aspirations
- What does good look like when selling your business?
- When do you feel will be the right time to sell?
2 Review your business structure
- How would this look to a potential buyer?
- If it is overly complex then could this reduce the value of the business or delay negotiations?
3 Have up-to-date management information
- Is this in an accessible format which is readily available?
Any delays in producing key information could indicate a lack of controls, Preston-Todd said. Furthermore, advisers should be able to evidence how this information is used within the business and what decisions are made by senior management as a result, she added.
4 Review your regulatory oversight including systems and controls
- Are they robust?
- Are you able to confirm what oversight within the business looks like, including any services outsourced to a third party which you are responsible for?
- Do you know your current business mix and any historical activities which your firm may have ceased due to de-risking of the business?
Preston-Todd advised business owners to be prepared and knowledgeable about any regulatory correspondence the firm has received, along with the outcomes, so they could provide assurances to any potential buyer.
"Ensure your latest compliance reports and file checks are available from your support provider, which serve to demonstrate an independent third party's view of your business," she said.
5 Know everything about your client base and staff
- How many clients does your firm have and how much income is generated from them?
- Who are your key accounts and how much value do they add?
- What is the likelihood of the new buyer retaining this business after sale?
- What is the current role of your key staff?
Staff are key. Any potential purchaser might want them to remain within the business to support transition, maintain client retention and assist with cultural alignment between the businesses, Preston-Todd said.
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