When it comes time to sell your business you want to get the best price possible, of course. Stephen J. Hunt, author and founder of Hunt Hospitality, shares three must-know tips for selling any business.
It took me just seven years to take the value of my pub portfolio from zero to $100 million dollars. I started with one pub – I now have seven and the due diligence process we’ve developed has enabled us to deliver an outstanding rate of return for our investors and stakeholders.
My modus operandi for success is simple: buy, add value, sell. Rinse and repeat.
My team and I use a stringent formula for assessing opportunities. It’s taken me decades to refine our due diligence process but I’d like to share three secrets of our success with you here, so that when it comes time for you to sell your business, you get the highest price possible for it.
1. Create systems
Most people start a business because they like what they do, or they are good at it. It’s why a baker starts a bakery, or an artist launches a gallery. As a result, the business revolves around their expertise. Without them, there is no business. That’s a hard business to sell.
If you want to build a sellable business, you need to create systems and procedures that enable the business to operate without your direct involvement. Try to remove yourself from the operations of the business as quickly as possible, train your teams to follow the systems, and create dashboards that give you access to instant data.
2. Add value to the business before you sell it
We work hard to dramatically increase the value of our pubs before we sell them. This process require focus, a commitment to doing little things right, and a raft of systems that enable us to measure the results of our efforts. If done consistently, you can increase the value of your business without incurring huge expense.
Here’s two things we do to increase the value of our pubs:
- Change the menu
People get tired of seeing the same old items, and are instantly attracted to something that’s new, different or improved. When we change up our menu, it gives our customers (old and new) a good reason to come back and try us out.
Staying relevant and up to date in any business is critical, so find ways to add new products or services and when you do, invest resources on telling everyone about those innovations. Get on LinkedIn, record a video for YouTube, write a blog or start a podcast.
You need to tell the world what you’re doing. After all, if you don’t, who will?
- Tap into your local community
We are a hospitality business so we invest a lot in social media marketing, but our biggest gains have come from investing in something far more valuable, and that’s community marketing.
What does that mean? It means we work hard to support our sporting clubs, our community groups and the local charities. In return, they reward us with their loyalty and custom. This creates great word of mouth and goodwill, two indispensable qualities for any small business.
There are new customers everywhere and many of them probably reside close to you. Take the time to find out where they are, treat them well and they’ll help you do your marketing for you, for free.
3. Create an Information Memorandum (IM)
The first thing a prospective buyer is going to ask for is information about the business. In the trade, we call it an Information Memorandum, or IM for short. This document tells the investor (and their bankers) what the business does, why it’s valuable and how much it’s worth.
This document needs to be meticulously prepared or it won’t stack up under scrutiny and the deal will fall over, so take the time to get this right.
The IM has seven main components:
- Your history as a business person
- A summary of your team
- A description of your asset(s)
- Application form
You can find lots of sample IMs on the internet. Download a few, take a look and start preparing. If you know what a buyer is looking for before you start, you can begin with the end in mind and build from there.
You get one shot to sell a business, so take the time to work out how to increase the value of it before you sell it. Follow a few of these tips and you may find that the process of increasing its value is not as hard, expensive or difficult as you thought.
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