Maximizing Value in a Corporate Sale: Obsolescence
If obsolescence issues are present in your business, potential buyers will naturally understand there is increased risk for your quality of earnings and growth potential. One question any good buyer will ask is “are your products/services going to be obsolete in the next 3-5 years?” Smart buyers will not stop there.
With evolution in business accelerating, potential buyers will ask if your products/services will simply be less competitive in the near to mid-term. If they are, risk to quality of earnings and growth potential increases.
Most company’s products/services will not be obsolete in the next five years. Smart CEOs and owners make sure their company is always improving what they deliver to clients and customers.
The area many companies ignore in regard to obsolescence issues involve their business processes:
Are your revenue generation processes becoming obsolete? Sales, marketing, advertising?
Are your financial control and reporting functions keeping up with your company’s growth?
Are you employing financial and operational analytics and business intelligence tools that are becoming standard operational tools for strong businesses?
Is the management team that got your company to where it is the right one to get it to the next level?
Are the production methodologies used for your products/services at a current state of excellence?
The list goes on.
As you examine all aspects of your business, do so with an eye towards competitive analysis. That is what good potential buyers will do in due diligence. The more competitive your products, services and business processes, the greater the likelihood that your company will have high quality of earning and growth potential. Potential buyers will factor that into their valuation.
You can sell your company if there are weaknesses in regard to obsolescence. You will simply not maximize value.