Business Sale Readiness Factor #8: People
I can’t think of many businesses where ‘their people’ aren’t a key resource. For some service businesses it’s pretty much their only key resource. Therefore, it’s so important to look after your teams, who in turn will look after your customers, who in turn will look after your business.
Prospective buyers will know this. Sure, they’re buying tangible assets, but they’re also buying intangible goodwill with your teams, customers and suppliers. So, they’ll want some reassurance that they’re buying into a business with a well-motivated, loyal and skilful team.
The following are three areas in which businesses tend to differentiate themselves as being ‘sale ready’ in this regard:
1. Attracting and retaining good people
It’s one thing to attract good people; it’s another thing keeping them. A high turnover of staff leads to significant extra recruitment and training costs. A less obvious, but equally damaging, consequence is a fall in efficiency levels. All of that has an impact on profits and, therefore, on the value of your business.
Psychologist, Frederick Herzberg, developed a theory that there are certain factors in the workplace that cause job satisfaction (motivators) while a separate set of factors causes dissatisfaction (hygiene factors).
The former are intrinsic things, like a sense of recognition, achievement and personal development. The latter are extrinsic things, like status, job security, salary and working conditions.
Too many businesses focus on the hygiene factors without appreciating that this really only helps reduce job dissatisfaction. If they want to increase job satisfaction, they need to focus on the motivators as well.
It’s a subtle difference, but one worth remembering when thinking about attracting and retaining good people.
2. Staff morale and wellbeing is high
Low staff morale and wellbeing is likely to worry a buyer, although the more optimistic buyers out there may see this as an opportunity to improve things and make more profit as a result.
If you’re a seller, why not improve the situation yourself and benefit from the upside. It often doesn’t involve lots of cost; see my point above about motivator factors.
3. There’s a strong management team supporting the owners
This point was covered in Business Sale Readiness Factor #1: Key Attractions, where I wrote about the threat of buyers walking away from businesses for sale that are overly reliant on the departing shareholders.
To counter this, businesses that are ‘sale ready’ tend to have strong managers able to minimise the operational impact of the owners leaving the business.
Therefore, in the run-up to a sale, it’s worth thinking about where there might be gaps in your management team that need filling; any training needs they may have; and any working relationships and knowhow that need to be passed down from the owners in good time before a sale.
In addition, if you’re looking to retain strong managers, you may wish to consider offering them ‘golden handcuffs’ through some form of a tax-efficient employee share scheme. This is a specialist tax area and we have a team on hand that can help, if this is of interest.
The above key factor is taken from our free and insightful ‘Sale Readiness’ diagnostic tool which aims to give business owners a score on the nine key factors determining:
- How attractive your business is for sale
- Whether you will maximise the final business sale value, and
- The efficiency and smoothness of your business sale process.
The online tool takes only five minutes to complete and your results will highlight the top three factors which are working well and the top three factors which require the most attention before you consider a business sale process. You’ll also be able to see how you compare to the global benchmark (average scores of all completed diagnostics) on each of the nine factors.
Of course, if it would be helpful, my team and I would be pleased to discuss your results and guide you on your next steps. In addition, each month I’ll be releasing a blog, just like this one, on each of the nine business sale readiness factors to help bring them to life.
Next month’s blog: Business Sale Readiness Factor #9: Sales and marketing
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