Service companies can be a tricky type of business to sell. The number one question that we see asked is when the owner leaves, are all of the accounts going to follow him/her out the door? The idea that the owner is the business is the central problem to overcome when you seek to sell your company.
What do we mean by service companies? Typically these refer to non-retail, non-manufacturing type businesses. Some examples include:
- Insurance Brokerages
- Accounting Firms
- Travel Agencies
- Medical Transcriptions
- Et cetera
A successful strategy for dealing with this issue will pay significant dividends when the time comes to sell. Here are some mechanisms for you to consider:
1. Build a Strong Team.
A Strong support team will help you step back and "manage the company" as opposed to you "being the company." A potential buyer will likely look for this - it will indicate a higher likelihood that they themselves will succeed because they have a support staff to rely on.
2. Continuity Plans.
Does any one know what will happen when something happens to you? Or to another key person? A continuity plan is a great tool for any business. But when it comes to a sale, the details that you have laid out in this plan will be a huge resource to a new owner.
3. Formal Procedures.
Big companies have formal procedures, so why shouldn't you? By formalizing the way your company works, you ensure a sense of continuity. Formalizing procedures has the effect of increasing quality, institutionalizing process, and again, adding more stability to your business.
4. Contracts.
Some industries or business are not driven by formal contracts. Others are. In the very least, try to ensure that you have some mechanisim in place to ensure your revenue stream will continue into the future. Letters of Intent, Heads of Agreement, long term purchase orders - all are a way to safeguard future business.
5. Non-Compete Agreements.
No one will be interested in buying a business if you might move across the street and open up shop again. A strong non-compete agreement is a must, especially when selling a service business.
Working on the above tasks preferably in advance of your decision to sell will go along way towards making your business more attractive to the market place.
Working with an advisor or business broker will go a long way towards pointing a service company owner in the right direction when they decide to sell their business. |
