Business sales – attributes and barriers – mid-level management
Your business is great, it would be a lucrative purchase for the right buyer who can take it forward and reap the benefits of future ownership and control. You know that’s true, but how do you convince the buyer, which in turn helps you achieve the desired, higher, price for your business.
Every business is different and whilst you know your business inside out there are potentially several aspects of your business that may make it hard to sell or may restrict the price a buyer is willing to pay because of perceived risks or uncertainty.
In a series of mini-blogs we will be looking at various barriers to business sale and assessing the impact these factors can have on the marketability of your business. Where you may view some factors as an asset it is possible for buyers to see risks, most business attributes have both positive and negative elements.
In this first blog I look at mid-level management, or potentially the lack of it.
Do you have a strong management team who will remain with the business and its new owners after your sale? Are they able to keep the business running, taking the pressure off your buyer, reassuring them the business will continue to be profitable in the future?
Where there is a lack of mid-level management it can create difficulties in finding the appropriate buyer for your business. If your involvement in operations is to cease following the sale, to maximise proceeds, you will need to be able to demonstrate to the buyer that they can run the business without your ongoing input.
It is possible that an industry competitor may see a business with no management costs after your departure as a lucrative addition to their current infrastructure. However, a lack of management team is likely to rule out private equity investors or buyers who are looking to expand into a new market as they will need the ongoing support of an experienced management team.
The in-situ management team can represent cost and inflexibility resulting in resistance to change, which may be seen as a disadvantage to some buyers, but generally a strong mid-level management team is seen as a positive attribute.
One question you could ask yourself is ‘Who is the face of, and who operates the business?’. When you leave will there be anyone else there to maintain and run the business? If not, you may benefit from establishing some form of mid-level management.