When it comes to thinking about a successful exit from your business…
There’s a few obvious financial red flags for potential buyers, looking to acquire your busines:
🚩 High customer concentration. So many successful business owners agree it’s daft, but do it anyway. Having a significant proportion of your revenue coming from just one or two big customers is risky. Always seek to diversify.
🚩 Inefficient management of working capital. Which in turn, results in cash flow problems and limits your ability to scale.
🚩 Excessive owners’ draw. If you’re looking for a successful exit (and not a lifestyle business), taking too much cash out of the business can impact cash flow and make it less attractive to potential buyers. Note: Taking out too little also poses problems; it paints an unrealistic financial picture and will not enhance your valuation.
🚩 Inaccurate financial reporting. Whether incomplete or inaccurate, it’s a major red flag for potential buyers or strategic partners and at best, will drastically increase any due diligence period, prior to an exit.
🚩 Lack of financial forecasting and planning. Retrospective is all fine and well. But potential buyers want to see your business is on a sound financial footing and has a clear path to the next stage of growth.
Maximising the valuation and saleability of your business involves more than removing a few financial red flags.
But it’s a start…