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
Green: 40-55
Yellow: 25-39
Red: 11-24
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.
