We Help Create, Protect and Optimize Enterprise Value.™
Business Operations/Risk Assessment
Establish a clear definition of the current business health so that those shortcomings can be improved before launching the sales process. Consider the following components:
- Analyze the strategic business plan
An acquirer is simply buying the future. When preparing a business for sale, make sure that a strategic plan has been developed and that has a clear vision and strategy.
- Know the financial position
It’s a fundamental requirement to present the financial position: past, current and, by way of a forecast, at least the next 12 months and ideally 3 years. The balance sheet should balance and be updated monthly.
- Separate personal assets from the business
Good financial management is essential and presenting accounts that are timely, accurate and easy to follow speaks volumes. Even if non-business assets are not in a separate legal entity, at least split them out for the purpose of presenting the management accounts.
- Review the sales/marketing history
A significant portion of the company’s value could be in the customer base. Evaluate the sales history and how the company was able to get to where the business is now. Make sure that the sales/marketing strategy is documented going forward.
- Evaluate the leadership team
Having a strong management team with clear expectations and good accountability within the leadership team is essential to operate sustainably. Having a carefully selected and balanced team with the requisite skills adds significant value to an enterprise.
- Identify, analyze and mitigate risks
The business needs to be presented as a stable enterprise to potential acquirers. Identifying and mitigating risks such as revenue concentration, obsolete stock, litigation, doubtful debt, etc. is essential to substantiate earnings.
- Review human resources policies and procedures
Often labor laws vary from state to state. Assure that the company is in compliance with these laws and that the policies and procedures are compliant with current standards. Employment issues and mishaps can easily undermine a deal.
- Evaluate technology
IT will play a very important role in the sales process, so the IT infrastructure and application systems that are in place have to be analyzed. Likewise, the administrative and communications systems must be up to current standards.
- Streamline the corporate structure
The business is more valuable to an acquirer if it is already running successfully and profitably without heavy involvement from the Owner/CEO. If not already in place, consider having a board with several non-executive members, which is a very cost-effective way of adding significant management horsepower.
- Formalize agreements with customers, staff, and suppliers
Make sure that agreements are current and valid. It could be a deal breaker if agreements are not current and perhaps only verbal. Well documented agreements reflect good, sound management practices.
Taking a consultative approach, we conduct interviews, analyze operations and review policies and procedures. We then combine this information with financial analysis to build the Business Operations/Risk Assessment Report. Following the release of the Assessment Report, we help develop an agenda for creating value before launching the sales process.