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Tag: finance

Checklist: How to Sell Your Business Fast

by charlottenoble
Checklist: How to Sell Your Business Fast

Plan Your Perfect Exit Strategy

Selling your business to the right buyer for the right price at the right time depends on the health of your business, having the right advisors, and your timing.

Get these factors right, and you can sell your business quickly.

Before putting your business up for sale, you’ll need to clarify:

  • Why you want to sell the company and what you hope to achieve.
  • Your ideal buyers and what their plans for the business would be.
  • Your goals for the sale. Do you want an earn-out clause or a cash sale?
  • How you’ll improve the current value of your business to get the best price.
  • How to market your business to sellers. You need to decide whether to use business brokers to do this or do it yourself.
  • The timing of the sale. You need to sell before patents, licenses, leases, etc. expire.
  • Due diligence. You’ll need accountants, legal advisors, along with specialists in tax, sales, and IT to perform vendor due diligence and make that information available in a virtual or real data room for potential buyers.
  • Who will negotiate the deal?

The following checklist will help you to achieve the best deal for your company.

Your Exit Plan Checklist

  • Clarify why you want to sell your business

You need to decide why you want to sell the business. It’s something prospective buyers will ask you, and it will have an impact on the business sale.

For instance, do you want to retire because you’re fed up with the stress of running a business or suffering from ill-health? Or is it because you want to start a new business, or allow someone with more expertise to take it to the next level?

Your reasons for selling the business could have an impact on the timing and outcome of the sale. For instance, if you decide you must find a buyer as soon as possible, you might have to accept a lower price or less attractive deal.

  • Decide what you’re selling

You need to decide if you’ll going to sell some or all of your company’s assets or the legal entity of your business as a share sale.

  • Focus on areas of improvement

Identify the issues and areas of improvement in your business and develop a plan for dealing with them.

For example, how can your company become less reliant on one or two major customers or suppliers? Are there areas that will benefit from cost-cutting? Is there a potential for rapid growth in the business? Can you improve productivity?

  • Prepare your accounts

You need to show how well the company has performed in the past few years.

Prospective buyers will expect to see at least three years of trading accounts. Buyers will be put off if they discover reports are missing or inaccurate. It will make them doubt your claims about the company’s health.

  • Get your paperwork in order

Your paperwork needs to be up to date and available to prospective buyers.

They’ll want to see supplier/buyer arrangements, licenses, maintenance agreements, lease or hire purchase agreements, business rates, insurance policies, list of employees, and their contracts, along with your company incorporation documents.

  • Resolve disputes

If you have problems with suppliers, customers, other companies, or employees, you need to document them and, if possible, resolve them before you put the business on the market.

  • Decide who will sell your business

Business brokers (or business transfer agents) can market your business for you, or you could do it on your own.

Brokers will demand a percentage of the sale if they sell on your behalf.

You also need to clarify what brokers will do to sell your business and whether you will be involved in picking and interviewing candidates.

Check for details such as extra fees or costs, termination rights, and cooling-off periods.

Look for business brokers that have experience in selling companies in your industry, in your markets, and similar size businesses.

  • Get a business valuation

Prospective buyers will want to know the true worth of your company. Hire a business valuation expert to do this for you.

  • Get expert advice

Put together a team of trusted legal and financial advisors who have expertise in selling companies. Get their help to identify areas of the business that need attention and on how best to proceed with a sale.

  • Create a confidentiality agreement

You won’t want sensitive details about your company or its sale leaked to employees, competitors, suppliers, creditors, and customers, so make sure prospective buyers sign a confidentiality agreement.

  • Perform Due Diligence

You need a team of specialists to produce a documented business strategy, healthy financials, along with information about your employees, and plant and IT systems.

That information must be made available in a real or virtual data room for prospective buyers to view and check.

Growing a Business

by lauramills
Growing a Business

A client recently said to me: “I want to grow our business and stop the cash burn – how do we do this? When is it the right time to invest and grow?”

What a tough question to answer. Each business is at a different stage.

We spent a day examining his business and determining what the growing pains were. He had started the business a few years ago and it grew from scratch to $750k turnover last financial year. This year they may potentially reach a turnover of $1.2m.

It was generating a great turnover and growing but they never had any cash.

“Why?” he asked.

After reviewing the business financials it was quite clear that the internal systems were not in place. He could not possibly understand the profitability of the products they were selling due to these inadequate systems.

Therefore they could not take the next step.

The first question I asked was: “Where do you want to take this business – what’s your goal? To build up the business and exit down the line, or are you looking to exit now? Or is this business a keeper if we can generate a great RoI?”

The response was: “We don’t know the numbers or where this business could get too as we have no clarity on the numbers”.

Something I see very commonly here in the SME businesses I work with – no clarity around the financials.

Next Steps

Step one for this particular client was to build a reporting framework around their products to determine what was profitable and what as not. If there were non profitable products (or those that deliver little profitability), should we dump them or only include them bundles in the online offering?

Step two: Build a fully flexible 3-way financial model (P&L, Cash Flow and Balance Sheet) for the next 3 years. Play around with the assumptions, i.e what other products can we put into the offering to customers?

Step three: Monthly reviews against the plan – what worked, what didn’t work and the whys around both.

The right time for a business to grow is when they can balance new customer demand with their internal systems and processes. Moreover, in the instance of this client, increasing recurring revenue streams. Growing faster generally costs more per customer as they need to engage more expensive channels within the business model.

Scalability is about continuing to engage customers with new offerings, and to engage new customers with your offering to the market.

To scale a business one must consider how the business model will affect the bottom line when you expand operations. If you have low capital expenditure and can grow your business with the same revenue / expense % it is much easier to deliver greater numbers in the long term and provide greater options to your customers.

It is early days working with this client but the potential is endless.

Under the Spotlight – The Operator

by lauramills
Under the Spotlight – The Operator

The CFO as an ‘Operator’

  • Ownership of Cash flow
  • Maximisation of Profits and Profitability
  • Reduce Costs
  • Increase Productivity & Efficiency

If cash used to be King, in today’s new landscape it’s now Emperor. The Operator frees up the Business Owner from having to worry about the day to day financial operations. Your CFO will ensure that your business is built on rock solid foundations and able to withstand unforeseen market conditions. Cash has always been critical to every business, however now more so than ever. Your CFO will help (re)structure your business to maximise your cash position. This involves balancing supply and demand while cutting back unnecessary costs and improving productivity, efficiencies and ultimately profit.

Being thought of as the Operator may not be the first role that a small business owner would think of for their CFO. In his recent blog, my colleague from The CFO Centre – Dr. Andre Van Zyl set out The Strategist role that a CFO often fills. While that role is critical for any organisation’s long-term existence, CFOs also have vast tactical experience in an Operator role. We are obviously not referring to operating a factory floor machine. We mean that the CFO has the ability and experience to oversee and operate a number of critical functions. A calm and reassuring Operator may be key to a company’s future.

Business frustrations

Time, or the lack of it, is so often cited by small business owners as one of their biggest frustrations. Our CFO Centre clients often comment that they are spending so much time working in-the-business that they can’t spend enough time on-the-business. A Part-time CFO who works closely with a small business owner can free up time for the owner by sharing the load. This ensures the owner is as fully focused on those very client or customer facing roles that were the initial catalyst for creating the business. This can be a significant ‘value add’ aspect of the Operator role of a CFO.

By the very nature of the CFO role, all our CFOs have either worked their way up through, or had executive responsibility for, the Finance functions in various organisations. They deeply understand the importance of running a tightly controlled organisation, with specific focus on cash flow management, profitability, and productivity. Andre wrote about developing three-way financial forecasting models which are critical for banks and financiers. It is just as important to deliver against those models.

The last two years have forced many businesses to consider whether current business models can survive, will survive, or even should survive. Critical decisions may need to be made on products or business lines to either scale-up, maintain status quo levels, scale-down or even shut-down completely. A part-time CFO can help small business owners as they work through that exercise.

A new or refined operating rhythm may therefore need to be designed, which may require minor tweaking or more major restructuring. Consideration of this may be critical for survival. The Operator who has extensive business experience will greatly assist with a rapid transition to a new business model. Central to this will be the robust and disciplined forecasting exercise – with potentially a myopic focus on Cash Flow management.

Part-time CFOs from The CFO Centre have the relevant experience required to assist business owners navigate through their growth journey.

 

Written by John Paterson, Principal (NSW) – The CFO Centre.

Rate Your Company’s Finance Function in 7 Minutes Using Our ‘F Score’ Test

by lauramills
Rate Your Company’s Finance Function in 7 Minutes Using Our ‘F Score’ Test

The CFO Centre has developed a quick and efficient tool for rating your company’s finance function: the ‘F Score’ test.  This test takes around 7 minutes to complete. It covers the 12 key areas of your finance function and provides you with a detailed eight page report.

The purpose of this report is to provide you with your ‘F Score’ profile. From This you will learn about the role of the finance function in the wider context of your business. In addition, highlighting key areas where significant and valuable improvements can be made.

Your F Score is a terrific aid in identifying opportunities for improvement. Not just in the performance of your financial function but, indeed, of your business itself.  It will help you maximise your chances of success and minimise the costs of failure.  By starting your journey here, you will find yourself better equipped to build a robust, strategic plan for your company. As well as squeezing more cash flow out of your operations.

The CFO Centre has extensive experience, a vast knowledge base, and a powerful set of tools and frameworks to facilitate sustainable and meaningful change in the financial performance of your business.

Not only do we provide ambitious companies with part-time Chief Financial Officers, we also serve as mentors to current CFOs who, although struggling with the changing economic landscape, are nevertheless driven by a desire to become “experienced, entrepreneurial CFOs”.

Click here to take the test NOW