How saleable is your business?

1. Try to specialise: Being a generalist forces you to hire generalist employees and as a consequence, your offering will be average at best. However, if you specialise, you can hire specialists and improve the quality of your work. Find a real niche and make it a competitive advantage, something that is a key USP and isn’t easy to replicate, but which can be learned over time.

2. Diversification: Make sure that no one client or customer makes up more than 15% of your revenue. Anything above that level and an acquirer will factor that into their perceived valuation of the business. Furthermore, even if selling your business isn’t immediately on the horizon, the loss of a customer that size normally wipes out any profit as overheads can rarely be taken out quickly enough to compensate.
3. Reduce working capital and maximise cash flow: Once you’ve standardised your service, charge up front or use progress billing to create a positive cash flow cycle wherever possible. Business with hungry working capital cycles will often deter potential purchasers. E.g. work in progress 60 days, debtors 90, means it is nearly half a year between taking an order and realising cash. Structure your business in a  way which allows someone to hold stock for you, outsource/subcontract repetitive processes and invoice on account or on order.  

4. Efficient marketing systems and digital footprint: Track your conversion rate of pipeline prospects to sales as it will become essential for an acquirer to accurately estimate the size of the market opportunity. If they see it takes 6 quotations to achieve 1 order then they will not be impressed. If it is 1 to 1 then there is serious value or you are to cheap!
5. Build in scalability: Make sure your business is scaleable and be able to respond to changes in demand for your products. The ability to have scale in your business will determine more than any other factor the earnings multiple you achieve in selling your company.