PLANNING for the transition of a business – be it sale or succession – is an emotional and complex process, in particular for privately-owned and family businesses.
According to Star Business Solutions marketing director Norman Hall, one of the most neglected areas of preparation is the “upgrade and optimisation of business software systems”.
“It is often neglected as many consider this just as a business cost, whereas it should actually be considered a business enhancement,” Mr Hall said. “Poor systems can have a major impact on the ease of sale of a business or the smooth transition from one management to another.
“At the very least poor systems can affect the day-to-day running of the business, profitability and staffing levels.”
Mr Hall said from successful business transitions he had observed, one of the keys to success was in having ‘investment-ready systems’.
“Any transition begins with making the business ready at all times to be sold for the best possible price,” Mr Hall said. “That is not to say that it needs to be sold – but ready just in case: there is a knock on the door; the owner gets sick; the family deem an intergenerational transition is timely; or family circumstances change.
“It is hard to get ‘investment ready’ at a moment’s notice.”
Mr Hall said the key to becoming transition-ready is building proper reporting.
“Understanding what is happening within the business, combined with exception analysis, helps underpin the evolution of the business to becoming more efficient and ‘investment ready’,” he said.
“Prospective owners need a quick, clear overview of what the business is, what makes it tick and how it performs to pre-determined criteria.”
OWNER-PROOFING THE BUSINESS
Mr Hall said business owners wanting to transition must move from working ‘in’ the business to working ‘on’ the business. Integrating business software systems are a key element of being able to achieve that.
“Part of building business value is being able to structure reporting systems that enable the owner to keep a timely eye on things from a distance,” Mr Hall said.
“By building intelligence into the KPIs (key performance indicators) that are produced on a daily, weekly, monthly basis, it is possible to observe business and human behaviour, even remotely.
“Without this, owners might not be fully aware of the important things happening within the business. Early attention may avoid disaster.”
HANDING OVER THE REINS
Owner-proofing a business is part of the process that makes handing over the reins of the business easier, according to Mr Hall.
“Let’s face it, it can be very difficult to let go, even with the best career advice and learnings. This is particularly the case where ownership has not yet transitioned,” Mr Hall said.
“There are key balance sheet items that the owner usually knows back to front. They know their ratios, the leading indicators and warning signs of impending trouble.
“These can become part of business intelligence reporting designed to initially aid the business day-to-day and then to enhance the potential success for new ownership or management.
“Business software has come a long way from the old accounting software days.”
Mr Hall said improved business systems should be the first port of call in building business capability and resilience – and doing so was an integral part of successful business transitions he had observed.