You may be considering going to market with your business. Maybe it’s because you’re getting close to retirement age. Maybe you feel like you are ready for your next “big adventure.” What are some of the tips that will help you as you start this process?
Whether your business is an HVAC company in Massachusetts, a machine shop in Rhode Island, or a home health care provider in New Hampshire, there are some common characteristics of businesses that make these businesses more appealing to buyers. Over the next few blogs, we’ll examine some of the characteristics of marketable businesses.
For this one, we’ll label it “financial performance.” Whether the company manufactures widgets, or repairs heating and air conditioning units, prospective buyers will want to know, first and foremost, “How does this company perform?” How profitable is the business? Does this company have a recurring revenue model? Or is every sale a one-off? Either model can potentially work to a buyer’s – and a seller’s – advantage, but a company with a strong recurring revenue model is a definite plus for an interested buyer.
Remember that a new owner is looking for something as close to turnkey as possible. One step that you as a business owner can take is to examine your revenue model. If you do not have as strong a recurring revenue model as you should, this is a good time to find a way to adjust your model to include more such revenue.
As an example, if you own an HVAC company and are thinking of going to market within the next three to five years, look at your service revenue model. Does your company primarily operate on new construction projects? While there may be some predictability in that model, perhaps consider instituting some sort of “service contract” plan with your customers. This allows you to have an ongoing and far more predictable stream of revenue. . It’s a revenue model that some health clubs and others, for example, employ – where the anticipated revenue is averaged out over twelve months. Being able to show a steady stream of revenue will put your business higher up on that list of “desirable properties.” There are many different industries and professions which can improve of the “stickiness” of the revenue generated in one way or another. Consider talking to a professional at ROI for ideas on how to improve the value and salability of your business!
And, COVID-19 notwithstanding, it is a busy time in the marketplace. There are a lot of businesses for sale and there are many more buyers than sellers currently. If we can help you evaluate the worth of your business or assist with your plans to prepare, give us a call!