Service Businesses are hard to value and sometimes struggle to get their price at sale time and a prospective owner can have a lot of questions before taking on a new business.
If you are in the Professional Service Business, - architectural, accounting, law or a Trade Service – plumbing, electrical or landscape gardening etc., you may want to consider the steps below to get your business ready to sell;
A. Be ready to sell your business at the price you want and
B. improve your current profits
STEP 1 - Customer Relationship Management System (CRM)
A good CRM system is essential for a service business – CRM is not only a list of clients and their contact details – it will include all communications you have with the client, quotes, invoices, notes on jobs and unique personal information which you can access easily. For a small monthly fee you can get a system tailored to your needs that is as good as a large corporate organisation. The value of a CRM is that you can show a potential buyer your current client information in a variety of different reports, set up for immediate access, this adds value to a business, enhances your efficiency gives you a basis for excellent customer service.
Here are a few examples of CRM systems for your reference.
STEP 2 - Job Costing
Correct job costing is fundamental for a Service Business. Without a good job costing process, you could end up without the income you expect. Some business owners spend very little time on this and wonder why their profits are not what they hoped for.
Look at setting up service agreements, where a client pays monthly for your services – this is a good income stream and is an advantage to a customer who doesn’t have to deal with a large invoice annually.
Quoting and recording time and materials for each job, is now an easier process with an online system that sorts out your margins automatically for every quote. A potential buyer will be looking first of all for your gross profit reports, being sales minus time and materials and the easiest way to keep track of this is with one of the readily available online systems. A business showing a consistent profit on each job, gives a buyer confidence in their offer.
Well supported systems available are:
STEP 3 - Accounting
There is little as important as a good accounting system which can produce immediate reports to show a prospective buyer where you are today with your cash flow – just the ability to pull out a report showing accounts receivable and payable at any time is a huge confidence builder to you and your buyer.
You can be sure about your own cash flow and track it in real time – this is a tool for making changes to your invoicing systems and not just for a buyer; this can give you the ability to know where you are with your money to enable you to make decisions about asset purchase or business expansion with confidence.
Have a look at what you can do with www.xero.com
STEP 4 - Your Website
The first port of call for a new buyer will be your website and its importance at creating a great first impression cannot be underestimated. You want to make sure it is visually attractive, and describes your business clearly, giving enough information to make it clear that you are offering the services needed and making it easy to make contact. A few good testimonials are of value and the need to keep your information fresh and up to date is vital. A neglected or out of date website is passed over for the next in line.
STEP 5 - Staying close to your clients with a good team approach
Keeping close to your clients is a good way to keep your clients. If a client knows a business is going on the market but is confident in your staff and is informed throughout the process, they will be less likely to find another service provider and may be happy to wait around to see what happens. This is important for the prospective buyer, to reassure them that the clients won’t flee when a new owner arrives. Communication is key and the best way to do this is with emails or newsletters or client updates on a regular basis and a friendly and welcoming approach from you and your staff will go a long way to making a transition seamless for the client.
The team at XO Accounting can assist you with getting your business ready to sell to ensure you get the best sales price possible. Contact us on 09 639 1004 for a confidential discussion.