Maximising the Value in your business
Aiming to be acquired? or enable a management buyout?
The key things you are looking to ensure is
Firstly, that your business is worth the price you are asking.
Secondly, that the business is able to run once you are gone.
Redgum help you capture your key IP so that you can be separated from your business and develop a system that dramatically improves your valuation.
Buyers questions
What are the common questions buyers are asking themselves?
If we invest, can this business scale?
Where will the bottlenecks and roadblocks be?
What are the tangible assets we are investing in?
Can we remove the previous owner and their core people? If the business can’t run without them, then what are we (the prospective buyers) getting?
How can we take over, scale customers, and ensure the internal operations will keep up?
Do we feel confident we can carry the business on and grow it? What is it we don’t know that will lose us money?
How can we be confident that a new technology isn’t going to usurp the manual steps that are there now?
For companies who have legacy systems.
Is this existing system going to help or hinder us?
Can the system be expanded and modified?
Is there good documentation?
Is there anyone who still knows how it works?
Factors that limit the price you can ask.
There are many factors that can limit the price, and it depends on the goal of the buyer as to which factors matter most.
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Scenario One. The default state.
First the buyer comes in, looks at your business and starts asking questions about how things work; you happily describe each aspect of the business, because you know it all; they ask more questions and you go into more detail.
At the end of the session you have demonstrated you know everything about your business, but the buyer’s head is swimming; there is so much to take in, so much to do and so much dependent on you “just knowing” what to do in each scenario.
If they were to invest heavily in marketing and sales it isn’t clear what would happen. It also looks like they would get drawn into the daily operations spending a lot of time fighting fires and juggling issues. They see the risk that when “something happens” they will need to rely on you being available to answer and help them out.
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Scenario Two. Solid processes.
The buyer comes in to look around, each question they ask you show how “the system” answers their questions.
At the end of the session their head is still full, but they have confidence that the processes will support them, show them the information they need, and guide them through the business processes to ensure they remain successful.
In this scenario they can see that if they increase clients the processes will allow them to take on more staff safely to meet the demand.
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Scenario Three. The plan.
Adding onto scenario two, You also show them the backing software schema and plans, so that if they ever want to make a change their developers can see where to make it and what impact it will have.
You sign the deal with the agreement that you will provide up to ½ a day per week to help guide and provide your expertise to see the solution built. This way the investors have the confidence they are not going to lose the valuable knowledge caught in your head.
In this scenario your buyers can see that scaling customers doesn’t mean bringing on more staff in lock step, they can achieve a scaling advantage.
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Scenario Four. The Business Operating System.
Adding onto scenario three, you have built and bedded down the system, your existing staff are comfortable with the changes and its starting to show an improvement in your business.
The investors look at your business operating system, they can clearly see that if they can acquire new customers the operations will scale gracefully to meet the demand they see they can generate.
Redgum can provide.
From the scenarios above, Redgum can help transition your business from the default state through to a more appealing and valuable solution for investors.
Existing system mapping
Providing a blueprint to your existing software systems to show investors the existing state and provide them a clear understanding of their options to expand and scale.
New system design and architecture
Providing the plans for a new solution that captures the ingrained knowledge you have, and makes it accessible and automated for buyers. This provides buyers with a pathway to derisk their investment and increases their confidence.
New business operating system
Providing your buyers with a solution that provides automation and managed processes to both significantly derisk their investment and increase the value of your business, allowing you to ask for the price you want to get.
Case Study
The owner of a payroll management company was looking to retire and his staff were keen to buyout the business, however there was a lot of manual work the original owner was doing. He was putting in 60 to 80 hours a week and had gotten used to doing so for most of his life.
The owner approached Redgum to replace the very manual set of Word documents, email templates and Excel spreadsheets that he had been using to manage all his client interactions, capture the payroll information and then submit it to an excel workbook to calculate the various payroll requirements.
Redgum built a system that provided their customers with an online system to capture exactly the information they needed, remembering the last payroll so that the clients only had to update any changes from last time. The system automatically contacted the clients, reminded them to enter the details, and for the accounts that didn’t change, automatically submitted the information to the accounting payroll system for final processing. It then provided screens to show and allow the staff to address the outliers before submitting those few final records for final payroll processing.
This system saved the purchasers a lot of time and meant they didn’t have to hire more staff to grow the business as they were planning and justified a larger sale price that suited both sides