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Valuation and Preparing the SME Family Business for Sale

Six Pointers to Value and Successfully Sell your Small Family Business


1) SMEs are not small-change

SMEs are critical to the economies of all countries. The pattern is similar globally - SMEs employ the majority of the workforce, and contribute to the majority of GDP. Typically, most SMEs revenues are below US$100m, but in the US, the threshold goes up to US$1bn.

Regardless of thresholds, there are millions of SMEs owned by families, and a tremendous amount of wealth is locked up in the businesses.

2) Unlocking the Wealth Locked in a Family Business

Building a business is incredibly difficult, and to grow revenues to $100m can take decades. Sweat equity. When 80% of businesses do not live to the 6th year, we realise that successful entrepreneurs are like gold-dust.

The owners extract annual value from the Business through a salary, dividends and perquisites. But most of the Business Value can only be monetised through the sale of the Business.

3) Preparing the Business for Sale

Our experience in helping SME owners sell their businesses is : Emotion (70%), Art (20%) and then Science (10%). Our mantra is: Do Not Rush. Given 90% of the owners do change their minds (alot for many !), we want to share with you some tips on how to prepare for the sale of a Business, eventually.

4) Six Tips to Successfully Sell your Business

1) Make yourself redundant (have a Management Team who can do the work largely without you)

2) Prepare early. We recommend at least 12 months lead-time.

3) Improve the Company's financial position to get maximum value.

4) Separate family issues from business issues.

5) Value the Business.

6) Get a professional advisor.

5) Valuing your Business and Finding a Buyer

Never forget to appraise your Business through the eyes of the Buyer. There are financial buyers, strategic investors, buy-and-flip players. Each will have different objectives. The goal is to bridge the valuation gap between the buyer and seller, and a competent advisor will be able advise you on all the sell-side and valuation issues.


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