Service businesses face some unique challenges – readily apparent when you are looking to sell the business. I recently spoke with Andrew Ford of Sales Co-Pilot, and we each shared some thoughts on what’s required for an effective sale. If you’re interested in lining up your ducks, here was our short list for owner managed service businesses positioning for a sale:
1) Ensure continuity of operations. Too often the owner manager runs the show, and if they are gone, so is the business. Processes need to be documented (More on this below), and delegated appropriately.
2) Ensure continuity of sales. Again, owner managers tend to be their own best sales person. You need a mechanism to keep sales coming in the event of the oncoming bus.
3) The boring part – financials which cover off profitability and most importantly cash flow. Profitability can be tweaked easily, cashflow can be problematic without a diverse customer base. So….
4) A documented customer base. Product manufacturers need new markets, retailers need walk-in trade, but service providers need to keep servicing their existing base. If it isn’t documented, it isn’t worth anything. If it is, it’s a saleable asset.
5) Customer service and retention plans to protect your customer base.
6) Documented proprietary processes. As a service provider, how you do “it” is your differentiator. If “it” isn’t documented and replicable, you can’t sell it.
7) A well-established differentiator (see above), and a target market which needs this. So you’d better have some data on the target market, competitors, and of course the documented customer base – hopefully within the targeted market.
If that last one sounds suspiciously like a business growth plan which pulls all of these points together, you’re getting the picture.
8) A history of how you’ve performed against the growth plan, and tweaks made to it.
Nothing affects a sell-price multiplier like documented growth against a plan. Potential buyers admire a business with proven ability to continue profitably. In fact, adherence to the plan is more important than continuous growth. It shows discipline, and understanding of your market. Hitting operational and customer service targets is equally important as hitting revenue targets. Because for service businesses, it’s how you do “it”, and plan to continue doing “it”.