As the business Owner, the responsibility for the success or failure of the business depends directly on you.
Over the last 10 years MAXIMA has created a number of tools to assist the business Owner to develop an understanding or a “Report Card” of how the business is growing in value. To recognize that value most businesses would have to be sold.
MAXIMA uses information on how ownership operates their companies, along with their financial performance to determine a model demonstrating “sale-ability”.
A sample report looks something like this:
By making use of basic guidelines from our in depth evaluation, we have created a self-assessment for you to use as a guide in determining your sale-ability as a company in the BUYER’S eyes.
This Sale-Ability model is not designed to determine your company’s value. This report is designed give you insight into what the typical buyer likes to see before you initiate selling your business. Proper preparations help you to achieve the highest value or greatest return on investment when selling your business.
MAXIMA’s Business Sale-Ability Self-Assessment Questionnaire
Pick the ONE answer from each of the below statements that BEST describes your business. Although your exact situation may not be listed, please pick the closest response for the purpose of this self-assessment.
1.Our business generates revenue by charging:
a)over $10,000 per transaction.
b)$1,000-$9999 per transaction.
c)$100-$999 per transaction.
d)$1-$99 per transaction.
e) based primarily on an hourly rate work.
2.Our business generates:
a)100 or more invoices per month.
b)50-100 invoices per month.
c)10-49 invoices per month.
d)1-10 invoices per month.
e)invoices seasonally, or some months we don’t generate any invoices.
3.Profit before Tax is calculated before bonuses, dividends, and adjustments for reducing tax consequences. Our profit levels have:
a)remained pretty consistent for last 3-5 years.
b)increased year over year for last 3-5 years.
c)included 1 negative year showing a loss in the last 3-5 years.
d)2 or more negative years showing a loss in the last 3-5 years.
e)been consistently negative over the last 3-5 years, we are structuring for growth or struggling to develop profit.
4.We receive payment:
a)in advance, before shipment and/or delivery.
b)as a partial payment (a deposit) in advance before shipment or delivery.
c)upon shipment and/or delivery.
d)after invoicing, within 15-30 days.
e)after invoicing, within 30-90 days.
5.Our business has:
a)full control of the manufacturing and distribution of products.
b)full control of our services offerings.
c)distribution contracts with more than one supplier with competitive terms and conditions.
d)various systems in place to access products and services as we require them.
e)a distribution contract with only one major supplier.
6.Our business’ client list is:
a)broad, no one client or customer list provides more than 10% of our revenues.
b)fairly broad, no one client provides more than 30% of our revenues.
c)reliable “walk in” high traffic customers, with a history of solid volumes.
d)based on “walk in” low traffic customers, volumes goes up and down.
e)narrow, we have one client that provides 60% or more of our revenues.
7.Our business has:
a)very little or no competitors, we are the industry leader.
b)a few competitors, however we have a measurable competitive advantage and customer loyalty.
c)many general competitors, however we maintain a measurable competitive advantage due to offering a product/service our competitors are unwilling to match.
d)been struggling to keep up with our competitors.
e)many large national competitors, we are a small local business that focuses on lowest price to get customers.
8.In regards to our financials, as the business owner:
a)I review with my accountant the status of all ratios on a monthly basis to make sure all data is accurate, reliable, and meets our creditor requirements/commitments.
b)I am very comfortable understanding the balance sheet and debt ratios.
c)I am still trying to learn what the balance sheet and debt ratios tell me.
d)I focus on other areas of the business and rely on my bookkeeper or accountant to advise me of any questions regarding the balance sheet or ratios.
e)I feel our business model does not require us to monitor ratios or our financial statements on a regular basis. We only track what we need to know.
9.Our business has:
a)developed a solid product offering to meet and exceed the needs of our broad client base consistently over the fiscal year without significant seasonal variations.
b)several product offerings to meet general market requirements consistently over the fiscal year with acceptable seasonal variations.
c)a product we sell to the general market with some variations in activities levels over the fiscal year with seasonal variations.
d)a product we sell to a sector of customers. We have significant seasonal variations in activity levels over the fiscal year.
e)a product we sell through a few special events with a modest amount of activity the rest of the year.
10.Our business process and infrastructure operates:
a)consistently, allowing me to take extended time away from the office as my staff know how to address almost all situations.
b)reasonably consistently, allowing me to take regular time off without much impact because I maintain regular communications with management.
c)reasonably consistently when I am directing and interacting with team members regularly/daily.
d)with my daily involvement. I am beginning to reduce my hours to a reasonable level.
e)only with my daily involvement. I work extended hours to ensure things are running smoothly.
11.Our business is supported by:
a)clear and understandable operations and process manuals our management team established through detailed assessment and analysis. The appropriate response for the majority of situations is documented, allowing individuals not involved in the day-to-day operation to understand and complete appropriate operational decisions.
b)by a clear and understandable operations manual where existing management would be required to assist in determining the appropriate responses to situations.
c)an operations manual and a management team who generally make good operational decisions.
d)a management team which is under development and an operations manual that is a “work in progress”.
e)my knowledge as the business owner. The buyer from outside the business would require considerable training to understand this business.
Add up the total number of each letter, and give yourself points:
a = 5 b = 4 c = 3 d = 2 e = 1
IMPORTANT: this is a very basic self-assessment.
MAXIMA’s proven analysis process includes various tools and methods to determine whether or not your company would be “sale-able.” The results of this quiz are to serve as a guideline to assist you in learning how a potential buyer may view your company. This process helps you identify key areas that may benefit from improvements.
MAXIMA does not recommend you make any financial decisions based on the results of this test. Please contact MAXIMA or your advisor before you make any final decisions regarding your company.
In the next few posts we will discuss each of the 10 Factors used for this Sale-Ability report card. We will explain why they are important to a potential buyer and how they could potentially add value to your business. As the business owner you can determine if you should focus on certain strategic areas to enhance the value of your investment in your business.
MAXIMA is a M&A Advisory firm that specializes in helping companies with their goals, whether it’s buying or selling, primarily in Western Canada but with an expanding market presence throughout Canada and the USA.