Preparing Your Business for Sale
- February 10, 2009
- by ServeNow.com Staff
How to prepare your process serving or PI business for sale or acquisition.
Lately, it seems like more and more companies are appearing out of nowhere to provide legal services on a regional or national level. However, these companies did not start covering large areas overnight. Many of these brands have been built through carefully planned acquisitions – or one company buying at least half the assets of another company. If your exit strategy or retirement plan includes selling your business, there are several things you can do to prepare your company for sale.
Realize Your Worth
First of all, recognize your value. Identify strategic advantages you have over local competition that would be of interest to potential buyers. What makes you stand out? Are you known for being able to complete the toughest jobs that no one else can? Perhaps your customer service has a reputation for being impeccable. Recognize and emphasize your company’s strengths. By setting yourself apart from the local competition, you increase your value. Once you know your strengths, think of how these would help someone acquiring you. Know the goals of potential buyers and determine how your company would help them meet these objectives. Focus on increasing your value to potential buyers by being able to meet a need they already have.
It is not just important to recognize your strengths, but also your weaknesses. Once you determine what your weaknesses are, develop a strategy to improve upon them. Also, determine how being acquired can turn your weaknesses into strengths. Perhaps you simply do not have the manpower to handle the amount of work you are offered a month. By showing a potential buyer how your already quality business would improve under an acquisition, you once again increase your value.
Get Your Name Out
Once you have identified what makes you unique and why that is valuable, market yourself. Join local, state and national associations for your industry. Attend their meetings and conferences to meet other people within your industry and begin to network. Prepare an “elevator speech,” two to three minutes of talking points on what your company does and what sets you apart. Don’t be afraid to talk to people. They are at networking events to do just that – network. Follow up afterward with important contacts you made and work to establish and maintain business relationships within your industry. Making yourself and your company known in your industry puts you on the radar of potential buyers that might want to expand. Do not limit yourself to simply networking in person. Join online professional networking sites such as LinkedIn.
Make sure you network locally as well. Join your Chamber of Commerce or attend networking events geared towards the legal communities. Many universities sponsor events that are open to the community, including alumni and networking events. Spend a couple of days going by attorneys’ offices and introducing your company to the legal support staff – they are the ones who normally decide which process servers and private investigators to hire. If there’s one company that most people tend to use, introduce yourself to the owner of that company. Develop local professional relationships and brand yourself to increase name recognition.
Be Ready From the Inside Out
Remember that name recognition means nothing without having a good reputation. Having a good local reputation will make your company more attractive to potential buyers. To develop a good reputation, you need to consistently provide two things: quality work and exceptional customer service. When you are a smaller company, it is easier to provide quality customer service based on the personal relationships you have been cultivating. Make sure you have a well-trained, competent friendly staff that can run your business in a way that you find satisfactory, even when you are not around. Realize that once a company is acquired it is customary for the previous owner to stay with the new company for a specified period of time. After that, it is vital that your staff is able to continue running the company in a way that would make you proud. Strong employees and qualified managers are essential during this transition. Robert Hild, CEO of Axzas Legal Support Provider, seconds this. He warns “the price [of sale] will be heavily discounted and [it will be] very difficult to sell if the business is too dependent on the owner.” Make sure you prepare an employee handbook that outlines the already-written and unwritten expectations of your employees.
Once you have developed a name for yourself, be sure that your company is internally ready to be bought. These preparations will ideally begin a year in advance. It is vital that you have your records and your finances in order. Have a clear understanding of the profit margin of your company, and know how much the company is monetarily worth. Don’t forget to include assets such as buildings, vehicles, or equipment. Hild recommends removing any unnecessary expenses (including ineffective employees) to maximize revenue before the sale. Maintain detailed financial records, and be sure to keep them for at least seven years (The IRS has more information about keeping and saving financial records). While seven years may seem like a long time, it is important to be able to provide a prospective buyer a full financial history. Don’t just organize your financial records. Also, create reports based off these records that show company growth and projected growth. Make it easy for prospective buyers to see what they would get by buying your company. In addition to creating and maintaining detailed financial records, you also need to keep detailed records of current jobs. It is also important to maintain an archive of completed jobs. Keep these records at least as long as you are keeping the financial records that are associated with them. As with financial records, create reports showing company growth and projected growth. Having organized records and detailed reports of both current and past jobs will make it easier for a large company to see how successful your company actually is. It will also make it easier for a potential buyer to actually take over the management aspect of your business if a sale goes through.
Jimmie Mesis, the editor of PI Magazine, is familiar with both sides of the acquisition process. Mesis stresses that “[w]hen people invest in buying a company, they want to buy a business, not a job!” Make sure that your company will continue to run as a quality business, without creating a slew of new work for potential buyers.
Another way to internally prepare your company for acquisition is to make sure you are up to date technologically. Have a professional and maintained website. Use software programs designed for businesses to track your current jobs, keep your books, and organize your records. Make sure that the way your business is run will either integrate nicely with other methods or is easily replicated.
Know Your “No”
Before you sell your company, it is important to know what your company is worth. Many factors go into determining the value of a company and the value to a buyer. The obvious factors include your total gross revenue, your total expenses, and the assets included in the sale. As mentioned earlier, factors that are not so obvious include how well the office runs without you, the company’s reputation, and the quality and effectiveness of your website. Know your “No Number,” or the absolute lowest price for which you are willing to sell your company. Be prepared to say “No” to any offer lower than your “No Number.” On the same note, have an “Absolutely Number.” This is the price (or above) that you are absolutely willing to sell your company for. Once you have determined what these numbers are, keep them to yourself! Revealing these numbers to potential buyers can derail the negotiation process.
With hard work and a little luck, a potential buyer will see the value of acquiring your company. In the meantime, continue to grow your business and establish your name and reputation. Who knows? Maybe, in the end, you will find yourself starting to acquire businesses of your own.