Tuesday 12 February 2013

Oh, it's just a Closet!

The skeletons will have to come out at some point.

Whether applying for a loan or selling the company, business owners must be prepared to disclose EVERYTHING.

Some popular ‘skeletons’ the find their way to the forefront are:

·         Outdated Inventory – obsolete or redundant inventory only artificially inflate your balance sheet.  They do not necessarily add value to your business.  Cleaning and purging on a quarterly basis is a good way to stay on top of this measure.

·         Obsolete Technology – every industry is different, but it’s important to regularly be reinvesting in your business.  Tradeshows, suppliers and trade publications are great sources for information on the latest and greatest technology in your field.

·         Largest Client that just Closed – if you have any customer that represents greater than 10% of your overall gross sales you run the risk of dramatically affecting your profitability and business value. Diversification is the key to long term stability.

·         Key Employee who just Quit – Do you perform regular performance evaluations, do you stay on top of industry trends for wages and benefits, are you continually motivating and challenging your top people?  For key people remuneration levels are important, but often times they are motivated by other factors like workplace culture, challenging work, effective leadership, learning opportunities, internal relationships, etc.

When selling a business it must look good in all areas.  To not be disappointed, business owners must plan, address weaknesses, and be realistic in their expectations if they don’t have solutions.

Do you have a small business question you would like answered about this article or others?
Bill Sivell is a salesperson with VR Windsor Inc. [www.vrwindsor.com] 519-903-7807, which sells businesses to buyers across Canada and around the world. His 14-year career includes diverse senior management positions in marketing, advertising, sales management and operations management. His blog appears every Tuesday.

 

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