Whether or not you are looking to sell your business, an unsolicited offer could surface at any moment.
An unsolicited offer of $12 million landed on the desk of a manufacturer of industrial monitors. Two years later, he sold the company to the same suitor for $36 million.
When the unsolicited offer came in, the business was in good order and well positioned for a strong valuation. Since the owner had kept up with ongoing maintenance over the years, he was able to focus on growing the business, grooming the next generation and extracting additional value during the period between offer and close.
“He looked at the offer as if he were the acquirer and viewed every decision through the lens of, 'Does this detract from the purchase price or does it enhance the value?’”
Director of Business Owner Consulting, Northern Trust
Maintaining the company’s health ultimately boosts its value
While an unsolicited offer might sound appealing, selling a business can be a stressful, laborious and emotional grind. The owner must be prepared to undergo a painstaking assessment of the company, while maintaining day-to-day operations for a successful outcome.
Sustaining the underlying health of the company, on an ongoing basis, is the only way an owner can prepare to capitalize on an unsolicited offer:
Document a business plan. It is critical to demonstrate how you have delivered against your business plan; this will be a large factor in the initial perceived value of the company. A business plan could be three bullets or multiple pages, but it’s important to have some kind of strategic plan and evidence of how the company performed against that plan.
Conduct an annual audit of the company’s books. The first annual audit relies on the auditor having performed an audit of the prior year closing balances; this is something that requires longer term planning.
Keep legal contracts up to date. Contracts with employees, customers, vendors and partners are all important and will be scrutinized.
Maintain your estate plan. A solid handle on related tax matters will help ensure that any business-related decisions stem from personal stability.
Keep an eye on the composition of the customer mix. Regularly assess your relationships with important customers and gauge the overall profitability of those contracts with a view to achieving sustainable growth.
Engage employees and empower them to drive the growth of the business. Reinforce that it isn’t a one-person show, while providing the owner with options for management and ownership succession.
Maintain appearances. If the website, marketing materials or company facilities haven’t been updated in a relatively long time, a refresh could be in order.
Ultimately, keeping a strategic eye on all aspects of the business can maximize value and raise the odds of turning an unsolicited offer into a successful sale.