So, you want to sell your business. Lucky you’re on tramada
Every forward-thinking business owner has many plans, and one of the most important is when – and how – they will exit their business.
The when is often the easier question to answer and will be based on your individual circumstances. Perhaps it’s because the sale price is right, maybe you’re facing an unforeseen state of affairs such as ill health, or simply that it’s time to move on – after all, you can’t run the business forever.
If you are thinking of exiting your business, you’re not alone. According to the Australian Bureau of Statistics* at the end of the 2016-17 period the number of businesses exiting the nation’s marketplace increased to more than 261,000 – many of them from the travel management sector that’s experiencing increased competition from mergers, acquisitions and the growing number of niche specialists.
You may have your own reasons and timing for selling, but preparing how to exit your business will set you up for success when selling it.
Start with your business plan
Now is the time to start planning your exit – don’t wait until you think you’re ready to sell, or worse, before you don’t have an option.
A well thought-out exit strategy is essential to managing the transition process and realising the full dollar potential from the sale of your business. That’s why the strategy should be woven into your business plan, giving you a clear picture of what your end game looks like and identifying the steps needed to find potential buyers or – if you intend to pass the business on to a family member or internal candidate – prepare your successor. Here’s a list of steps to be considered.
1. GET YOUR HOUSE IN ORDER. It goes without saying that a business that’s in great shape will earn the best price, sell sooner, and streamline the entire sale process.
But beyond appearances – such as ensuring your workspace and website are presentable and functional, and even more important than having a business staffed with talented employees – is that you absolutely must have a wide range of records at the ready. No matter what you think you have of value to sell, nothing stands up to scrutiny better than hard facts and evidence, which leads us to our next point.
2. VALUATE YOUR BUSINESS. To start with, you’ll need financial reports – generally the past 3-5 years’ worth of records, a current profit-and-loss statement, cash projections, a list of business assets, and other reports used to evaluate and substantiate the worth of any business.
And while getting a valuation on your business is never simple, it’s always essential if you want to arrive at a realistic price. There are many online tools and professional advice that can help determine the broad value of your organisation, which is usually arrived at by multiplying its Earnings Before Interest and Tax, or EBIT, by its growth potential.
While not down-playing the importance of your business’ EBIT, increasing the multiplier in the above equation is the key to attracting big offers. Here are a few elements of a travel business that you can expect buyers to pay a premium price for:
- Expected continuity of the business once the owner exits, including returning customers, ongoing cash flow and stable staffing
- Tangible business assets such as cash, office furniture, equipment and software including tramada, customer relationship management (CRM) system, and website
- Intangible assets, which are often harder to valuate such as your business’s reputation, brand awareness and customer loyalty
- The position and uniqueness of your business in the marketplace. Is there a growth upside in the business that’s yet to be realised?
- Your sales team’s performance
- Infrastructure in terms of support, administration and management structure
- Strength of your data security and compliance with government regulations
- Quality embedded work practices and policies.
tramada®-enabled agencies can deliver on many of these critical elements simply and easily, and vastly improve the value of their businesses in the minds of prospective buyers. For example, the system gives you the critical ability to report on forward bookings, commissions and potential supplier overrides using standard, out-of-the-box reports such as:
- Forward Bookings Departure by Month
- Forward Bookings by Consultant, Type, Status, Branch, and Debtor
- Sales Analysis by Segment Type, Branch, Domestic/International, Booking Type, Booking Source, Period, and Consultant
- Profitability Analysis
- Yield Management
Other reports that are readily available in tramada can be used to showcase client-base loyalty, spend and profitability, and include CRM reports by client spend range, loyalty program, marketing preference, travel theme, and holiday type. Plus, you can show prospective purchasers all-important information about your Corporate Account Customers, including outstanding balances by period and Account/Debtor Statements – as well as be able to quickly and easily export key information on customers from your database.
All these insights and more – such as those accessible using tramada’s sophisticated business intelligence (BI) capability, connect BI – clearly demonstrate the strengths (and value) of your business. That said, you’ll still need to document that all-important intuitive knowledge and information you have stored away in your head and make it also available to the next owner.
Whatever value you arrive at, it must reflect the buyer’s point of view – not only the quality of your clients and your cash flow but also any risks involved, prevailing market conditions and, importantly, those before-mentioned multipliers that will drive bottom-line results long after you’re gone.
You’ll also need to know what price you want including your lowest acceptable offer, where you’re prepared to compromise, at what point you’ll walk away from the negotiating table, and what you intend to do if you don’t get the price you want.
3. CREATE A SUCCESSION PLAN. If you are passing the business on to a junior partner, family member or other inside candidate, you’ll have already decided who is capable of succeeding you and spoken to them about your plans. You will also need a progression plan and supporting training program to gradually move control of the business to your successor.
4. FIND A BUYER. If your goal is to sell your business, you’ll want to know what kind of buyer is likely to be interested, and then of course you have to find one. Here you may rely on a broker who can handle the tricky matters such as advertising and negotiations, and seek professional legal advice for the sale contracts.
5. LOOK AFTER YOUR EMPLOYEES. If this is relevant to your business, think long and hard about where they stand with a new employer, perhaps even how they will end their employment. Whatever happens, it’s important that you follow proper procedures, fill out the necessary paperwork, and ensure you look after their best interests.
6. MAKE YOUR DECISION WITH CONFIDENCE. Fast-forward, and congratulations! You’ve found a great buyer, agreed a price, closed the deal with confidence and sailed off into the sunset, or maybe to your next entrepreneurial adventure.
You’ve now learned that it’s never too soon to plan for when and how you’ll hand over the keys to the front door. You also know that an exit plan which is tightly integrated into your business plan helps you make the big decisions, plan the necessary steps, and follow through in the right way – at the time that’s right for you.
And you have discovered the immense value you receive from tramada’s many embedded, best-practice work processes, and the wide range of reports and business insights that delight prospective buyers.
* 8165.0 – “Counts of Australian Businesses, including Entries and Exists, Jun 2013 to Jun 2017”, Australian Bureau of Statistics
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