Identifying and resolving a company’s weaknesses is one of the most difficult steps business owners go through when planning for their exit and an ultimate sale. It’s a time to be brutally honest and open-minded. What areas of your business are a struggle? Are there areas where your competitors have an advantage? Take this opportunity to listen to and objectively consider customer and staff comments and complaints.
Some weaknesses may be very specific to an industry, or even to an individual company, but the following areas are a good place to start your evaluation:
- Financial – Evaluate your revenue stream and cash flow. Buyers will want to see accurate financial statements and a healthy balance sheet for the last five years. Be able to show a strong, upward trajectory for the trailing 12 months, and ideally, for the last 2-3 years.
- Market Position – Have a good understanding of where you stand as it relates to your reputation, market share, sales, service and price. Know how you compare to your competition.
- Marketing and Advertising – Be sure your message is on target and that your budget is appropriate to sustain and grow your business. Know and evaluate your competitors’ messages.
- Position for Growth – Document all opportunities for growth and what will be required to accomplish those goals.
- Intellectual Property – If you have patents, copyrights or trademarks, be sure they are not in jeopardy. If you don’t have any, are there missed opportunities to acquire IP on names or products? Having IP does increase the value of your company to potential buyers.
- Human Resources – Since your people are your greatest asset, there are many bases to be covered. Do your employees receive competitive pay? Have your key employees executed non-compete and non-disclosure agreements? Do you have the right people in place, or do you need to make changes? Having employees who are cross-trained is a strong selling point for buyers. Evaluate your working conditions and retention programs and make any appropriate adjustments.
- Culture – Although intangible, your company culture will be important to prospects. Buyers want to know they are acquiring a company whose culture is conducive to employees staying with the company. Be sure your organizational structure is clear and appropriate for your business and that bureaucracy and red tape are eliminated.
- Suppliers – Document not only who your suppliers are, but also the relationship and whether there are alternative suppliers should one of them become unavailable or cost prohibitive.
- Resources – As you outline what resources are available to you, document the resources that you need but don’t currently have.
- Physical – Evaluate whether your facilities and equipment are adequate for your business. If they are not, document the changes that need to take place.
As you read through this list, make note of any other areas that need your attention. This is your opportunity to either resolve any weaknesses or be prepared to present them as a growth opportunity for a prospective buyer.
If you’d like assistance with identifying your weaknesses or any other aspect of preparing your business for sale, contact us at [email protected] or 913.648.0185.