First, the good news: merger and acquisition activity in the recruitment community continues to accelerate as larger firms consolidate, expand and seek to increase shareholder value. Many owners of smaller specialist firms have a trade sale exit in mind and can start thinking seriously about taking the next step now that economic conditions and earnings are on the upward swing.

The bad news is achieving the best possible sale result is not just a matter of getting financial statements together and putting the business on the market. Selling a business takes planning, preparation and deft execution. Many business owners fail to achieve their desired result by not investing the required time up front to build the value of their asset.

Five Key Strategies for Achieving the Best Sale Result:

1. Sever the emotional connection. One of the most significant mindshifts that must occur for the business owner is in stepping away and taking an objective view of their company. When the decision to sell is made, the business ceases being a venture into which the owner has poured all of their heart and soul for a number years and becomes a product with all the associated features and benefits for a potential buyer.
2. Take time to understand the key drivers of potential buyers. As with any product or service, an effective sale will not occur if the vendor does not understand what is important to potential buyers. The purpose of most mergers or acquisitions is increased shareholder value, yet the buying decision will differ for every transaction. Examples of key buyer drivers include cultural fit, alignment with the long-term expansion strategy, access to new clients (particularly for cross-selling opportunities), increased cash flow, decreased risk, bargain-priced turnaround opportunity and quality of available employee talent.
3. Invest in proper planning and preparation. Once buyer drivers are understood, time must be invested in defining a complementary strategy for building business value and maximising its profitability and performance. This strategic plan should define high impact objectives, timelines, opportunities and actions. The business must become attractive to potential buyers and this does not happen by accident.
4. Move out of the business. A critical factor in determining the value of a recruitment business is the degree of reliance on its owner. A business is far more attractive (and a lower risk investment) to a potential buyer if it is sustainable and self-running, than if its performance is tied to that of the principal. Building a quality team, implementing robust systems and maximising client relationships are fundamental to achieving the best possible sale result.
5. Get the timing right. Don't rush. Build the business to a level of profitability and performance that will make it appealing to potential buyers without compromising the desired sale price. Allow up to 2 years to get the business ready for sale and a further year at least for the earn-out period.

Achieving the best sale result is not easy, but it is based on some simple fundamentals. By investing time, money and effort up front, business owners can minimise the pitfalls, pain and disruption that is inherent in the sale process. Use these simple strategies as a guide, but do not be afraid to seek external input and assistance. The return on investment – regardless of the short-term impact on cash flow - will be well worth it when that multi million-dollar cheque is handed over.

Andrew Cassin is an Associate of Navigator Consulting whose career in the recruitment industry spans more than 11 years. He holds a Bachelor of Business and has worked as a Management Consultant since 1999, advising business owners on such critical issues as strategic planning, exit strategy and building business value. Contact details: Email acassin@navigatorconsult.com or phone 03 9598 9876 or 0412 761 766.