When it comes to managing procurement in relation to selling a business, there are several steps that business owners should take to ensure a smooth and successful transition.
Here are some key considerations:
Identify key suppliers
It’s important to identify the suppliers that are critical to the success of the business.
These suppliers may include those that provide unique or proprietary products, those that are crucial to the manufacturing process, or those that provide essential services.
There may also be products with a long production lead-time and extra stock has to be held as a contingency.
The business needs to highlight all and any long-term commitments that they have made to any supplier, as they might have made investment that they will only recoup over time.
These commitments need to be honoured.
Once all key suppliers have been identified, it’s important to establish strong relationships with them and ensure that they are satisfied with the current arrangements.
Assess procurement contracts
As part of the due diligence process, potential buyers will want to review procurement contracts to understand the terms and conditions of the relationships with suppliers.
Business owners should review these contracts and ensure that they are in compliance with all relevant laws and regulations.
A database of all contracts should be created to help the new owner. This should include a brief overview, contract dates, notice period and method of any notifications. It would also include any specific or bespoke details of any of the contracts.
Any issues should be addressed and resolved prior to entering into negotiations with potential buyers.
Streamline procurement processes
Businesses should aim to streamline their procurement processes to make them as efficient as possible.
This can include implementing digital tools to automate procurement processes, consolidating suppliers, and negotiating better prices and terms.
It is also a good time to assess how many people are actually involved in making purchases and if applicable, look to reduce this to just one or two personnel at the most.
Consider supply chain risks
Business owners should also consider any potential supply chain risks that could impact the sale of the business.
This may include risks related to supplier quality, delivery times, or disruptions in the supply chain.
While this might be covered when identifying key suppliers, it is important that all critical aspects of the supply chain are identified.
Make the geography of the supply chain clear and any work currently under way to reduce the dependency on suppliers located at the other side of the world.
Plan for continuity
Finally, it’s important to plan for continuity during the sale process.
This may include developing a plan for how procurement will be managed during the transition period and ensuring that key suppliers are informed of any changes in ownership or management.
By taking these steps, business owners can help ensure a successful sale and a smooth transition of procurement responsibilities to the new owner.