16 Jun Around the Web: A Week in Summary
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A recent article from Business Enterprise Institute entitled “How to Increase Business Value” offers suggestions for how business owners can build transferable value in their business. This transferable value is what the business is worth to someone else with the current owner no longer part of the business (aka what it is worth to a potential buyer).
To build transferable value, consider the following value drivers:
- A capable management team
- Established and documented procedures and systems
- A diverse customer base
- A proven growth strategy
- Recurring revenue
- Strong cash flow
- Competitive advantages
- Proper financial reporting and forecasting
A recent article from Rental Equipment Register entitled “Market Update: Is Now the Time to Sell Your Rental Business?” discusses the current state of the equipment rental industry and what owners in this industry should consider when contemplating a sale.
An owner will want to evaluate both macro and micro aspects. Macro is how the market is performing. Micro is how the company is performing.
After a strong 2019, the pandemic made 2020 a very different year. Companies expecting more growth instead experienced a decrease in business. Deal making came to a halt for many as travel was suspended and businesses went into a holding pattern. Yet some private equity groups became more active in making acquisitions. Optimism is now growing for 2021 and 2022 with transactions expected to pick back up. This could mean great things for sellers if their businesses have remained solid and are ready to be sold.
A recent article from Divestopedia entitled “Customer Communication in Mergers and Acquisitions” explores the dilemma of what and when to tell customers about the sale or purchase of a business. This decision can have significant consequences, so it is important to approach it strategically.
Some acquisitions are done very quietly and customers may not even realize there has been a change in ownership. Others are done very visibly with intentionally making it known that the business has been acquired. When deciding which route is best for your unique situation, ask yourself the following questions:
- Can you actually keep it quiet?
- How will customers react to the news?
- What level of time and money will be needed to maintain positive customer relations?
- How will you approach internal communications to your employees?