03/08/2022
Dream of selling your business for millions one day?
Get absolutely top dollar by looking after it as well as the Rolex you bought in 1973.
Prices on the second hand luxury watch market have shot up like bamboo shoots in the past two
years. Owners of rare Rolex, Patek Phillipe or Audemars Piguet watches purchased in the
1970s heard the rancour, and some were able to ring the bell for profits of several hundred
thousand dollars.
Not all owners of such watches cashed in at the top of the market, however. As within
any asset class, certain metrics dictate the price of each individual item. In the case of luxury
watches, at a basic level, it is the specific model and condition that sets the price. It gets far more
nuanced than that though, as many collectors prefer unpolished vintage models that have
developed an eye pleasing patina.
Ultimately, then, it was those owners who showed passion for their watches - choosing the
right models, knowing whether or not to polish them, getting them serviced regularly, that
were able to cash in.
Passion, however, was still not enough. They were also able to demonstrate their passion
and care by maintaining immaculate records throughout their ownership. In the watch world,
this means keeping the original box and papers, and all service records and receipts. Over a
span of up to 50 years, this is no small feat.
By contrast, for those who made feverish attempts to retrospectively patch up their watches
tojoin the gold rush, it was often a case of too little too late. These types of antics stick out
like a sore thumb to seasoned collectors, and in a finicky market where subtle differences in
condition result in drastically different prices, there would have been some seriously gutted,
neglectful owners out there!
Now, what on earth does this have to do with the price of fish, or the process of selling your business?
Think of your business like a luxury watch, and your purchaser like a seasoned collector.
Just as a seasoned collector knows its way around a Royal Oak, a purchaser of a multi-
million dollar business knows its way around a balance sheet. It can also tell when company
manuals were written a week before they started due diligence (Word’s ‘last modified’
function can be a killer here). They can sniff out the DNA of a systematised, smoothly
functioning business with high growth potential a mile away.
Many clients we have assisted in the sale process actually have extremely well run, high
growth businesses. Where they have sometimes fallen down, however, is their record
keeping. While they had no need to show anyone how well their business was operating
while they had their heads down, grinding out profits over the years, suddenly they need to
actually demonstrate to a buyer just how systematised and sustainable their business really
is. Without proper records, it is very difficult to convey this in an unequivocal and
indisputable manner. This is further augmented by the fact a purchaser willing to fork over
millions for a business almost always has a posse of militantly focussed, risk averse
professional advisors at their disposal. The fine tooth comb can all of a sudden feel like a set
of razor sharp teeth.
All is not lost, however, and its never too late to start. You simply need to set up folders on a
cloud based system and start filing everything in relation to your business in these folders. It
will take an employee a couple of hours a week to do this, once the initial process and
backlog is dealt with.
If this sounds laborious, consider this: would you rather do it now and pay a staff member to
do it, or pay your lawyer and accountant tens of thousands to do it when you go to sell? And
when you factor in that not doing it might cost you millions, or worse still, a crashed deal,
you can see that it really is a no-brainer. It doesn’t have to be remotely perfect, either. All
that matters is demonstrating to a purchaser and their advisors that a genuine, consistent
effort was made over time. This alone will put you well, well ahead of the pack.
Below are some suggested folder headings to get you started (not an exhaustive list). Happy record keeping!
Supplier contracts, Customer contracts, Leases, Employment/Contractor agreements, Details of incentives, Bonus schemes/Equity Arrangements, Financials/YTD Management Accounts, Evidence of achieving target growth, Other objectives, Evidence of achieving objectives, Manuals, Systems, Protected/Non-protected IP, Customer databases, Social Media Content, Regulatory Breaches.
Lateral Lawyers
