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Is your business sales-ready?
Sales maturity of a business
Do you want to sell your business one day - or just be prepared if the right opportunity arises? Then it's worth looking at whether your business is ready to sell. It's not just about earnings, but also about structure, risks and resilience. A sale-ready business is more attractive to potential buyers - and can often be sold at a higher price and on better terms.
The advisors at Business Broker experience in managing and operating businesses. Here are our most important guidelines and a checklist you can use to prepare your business for sale. If your business is ready for sale before we enter into an agreement to sell it, we will often be able to complete a structured sales process faster and at a better valuation than if it were not ready for sale.
What is sales maturity?
Sales maturity is about strengthening the value of the company through profit and cash flow improvements. This makes it attractive to as many buyers as possible. It's a discipline that is typically part of an exit strategy - whether you want to sell tomorrow or in five years.
If you would like Business Broker your sales preparation process with Business Broker , please contact us for a no-obligation consultation. Business broker Ulf Steiness
Checklist: Is your business ready for sale?
Here are 9 areas you should consider as an owner manager:
1: Key employees
- Are your key employees motivated to stay - even after a change of ownership?
- Are there contracts or incentive schemes in place?
Buyers place a high value on knowledge and relationships staying with the company. A sales-ready company has key people in place and can demonstrate their continued commitment.
2: Customer composition
- Do you have a healthy customer spread?
- Does one customer account for more than 25% of revenue? This can be a risk for the buyer.
A buyer sees the large customer as a vulnerability that can trigger problems during economic fluctuations or if collaboration problems arise. Therefore, having a single customer that accounts for a disproportionate share of revenue is a detractor in the buyer's view.
3: Finance optimization, inventory and working capital
- Is your inventory and fixed assets well trimmed - or is it tying up unnecessary capital?
- Are you on top of debtors and payment terms?
High inventory and poor payment terms drag down liquidity. Part of sales maturity is to optimize working capital (capital tied up in inventory and receivables) so that the buyer sees a healthy, well-run business with readiness for new investments and initiatives.
4: Documented processes
- Can business processes and operating models be understood and operated by others?
- Do you have written documentation of important collaboration agreements with customers and suppliers?
The easier it is to carry on the business without you, the more attractive it seems. Sales maturity involves getting systems and processes in order so that they are easy to hand over.
5: Financial overview
- Have you updated financial reporting with relevant key figures?
- Does it provide insight into where and how value is created?
Sales maturity is also about transparency. Buyers prefer companies with clear financial management, where decisions can be made based on solid and clear data.
6: Real estate and capital structure
- Are properties and assets positioned appropriately in the company structure?
- Is there a possibility of divestment, demerger or sale & lease back?
A flexible structure makes it easier to trade. For example, sales maturity can mean moving domiciles from the operating company into a real estate company or implementing other structural measures.
7: Strategic direction
- Is the company's strategy clear and realistic - and is it being followed through?
- Are there concrete goals and action plans that support growth?
Sales maturity is also about the future. A clear plan gives the buyer confidence that there is potential that can be realized.
8: Risk assessment
- Are significant risks (e.g. litigation) identified - and are they mitigated?
- Are you on top of compliance, environmental issues and insurance?
Once risks have been identified and managed, your company will appear professional and well-organized, and you will be better prepared for due diligence. Sales preparation reduces uncertainties that could otherwise delay the sale.
9: Clarity on the role of the owner manager
- Is the business dependent on you personally for day-to-day operations?
- Have you considered your role after a change of ownership?
If you, as owner-manager, are indispensable, the company becomes less valuable in the eyes of the buyer. Part of the sales maturation process is to hand over responsibility and make it clear how the business works without you.
Make sales maturity an ongoing exercise
Sales maturity is not only relevant when you want to sell. It's sound business management. Many of the actions you can work on here will also strengthen day-to-day operations and decision-making power.
Are you unsure about how your business stands in relation to a sale? You are always welcome to have a confidential and non-binding conversation with Business Broker get a professional valuation.
For more information, you can also read our articles on exit strategy and structured sales process
