SELLING YOUR BUSINESS? RISK VS OPPORTUNITY ANALYSIS

If you have decided to sell your business and business assets, one approach is to just sit back and wait for the offers to flood in. A much stronger strategy, however, is to formulate a risk vs. opportunity analysis to maximise your company’s sale value. You can do this by thinking like a buyer and preparing a plan for the future growth and expansion of your business.

 

As you can appreciate, a potential buyer will be looking for a business opportunity that can not only be expanded but one that has few risks. If you can pinpoint every opportunity and risk yourself, highlighting areas for potential growth and having a plan in place to mitigate any potential risks, your business’s sale value becomes much greater to a buyer.

 

The value of a business is in large part, based on a multiple of earnings dependant on ‘risk’. This is not just a straight multiple because other factors affect a business’s sale value - with the opportunities for growth and the risk of revenue loss high on this list.

Potential buyers will do their own due diligence, so it pays for a seller to do their own analysis, as this puts you in a good position to promote all of the positives and formulate solutions for any potential negatives.

 

Your research should encompass three key areas:

  • Economic environment
  • Industry factors, and
  • Identifying every business risk, opportunity, strength and weakness

 

Economic Environment

How does your business sit within the broader economic environment? The Australian economy has troughs and peaks, which affect most businesses. Understanding the economic climate helps you to formulate a plan that mitigates economic risk and takes advantage of any downturns in the economy.

 

Industry Factors

It is likely that the broader economic environment will influence your industry, but even so, there will be businesses that are successful and others that are failing. One of the best ways to risk-proof your business is to analyse the competition within your industry and to use this information to develop a set of strategies for future growth. Such methods as Porters 5 forces model can help with this.

 

Risk Analysis

The broader economic environment and industry factors will feed into your risk analysis. Then, you can outline the strengths and weaknesses of your industry, as well as the opportunity for growth relating to your business.

 

For example, if your business is within a new and upcoming area of the market, a buyer might be concerned that the big players in your industry might venture into your market space and pose a threat to your business’ profitability. However, if you understand the concerns of the buyer, you can reassure them by having the appropriate measures in place that will secure your market position.

 

Another concern might be losing a major supplier, particularly if you obtain your inventory from only one or two suppliers. Reassuring your potential buyers that you have long term contracts in place and that you have a number of other suppliers who can fill any unforeseen gaps is another way to reduce your business risk and play to your strengths.

 

SWOT Analysis

Once you have completed the above analysis, you can bring it all together into a SWOT Analysis, which you can present to potential buyers.  A SWOT Analysis is a list of your business’s Strengths, Weaknesses, Opportunities, and Threats and gives potential buyers a clear view of your business’s position in the market place.

 

Presenting strategies for taking advantage of any opportunity for future growth within your market space, as well as overcoming any weaknesses or potential threats, is one of the best ways to maximise the sale value of your business and its assets to a potential buyer. In other words ‘special value’ needs to be established and successfully communicated.

 

Thinking of selling your business? At Verified Businesses, we are the leading Business Broker on the Sunshine Coast and we have an enviable reputation within the local business community.

 

Want to know more about how to sell? Contact our friendly team at Verified Businesses for your own information pack or to book a consultation today. At Verified Businesses, success in business is Verified.