We have identified 10 points to consider before and during the sale of your business.
1. Clarify your reason for selling
This is often one of the first questions you will be asked by a potential buyer. Think about it from the buyer’s perspective, if the business has real potential then why are you selling? Your answer should be compelling and convincing and one that the buyer will be comfortable with and show that the company is on solid ground.
2. Get your accounts in order
Selling your business will require that you have at least three years of trading accounts for the buyer to review. Buyers of a business need to be able to tell what your business would look like if they owned it therefore the better prepared your accounts are and the more detail you can show, the more organised and professional you will look to the buyer.
This process will also help you to identify the parts of your business financials that need attention and “fixing” before you offer your company for sale.
3. Consult your financial advisor
While getting all your paperwork in order it would be a good time to consult your financial advisor on all aspects of the financial planning process. Your advisor can help you determine the right time to move on as well as help you understand your personal and corporate tax circumstances and your options with regard to the deal structure for a sale.
4. Organise your paperwork
At some point in the selling process, the buyer will want to review all your relevant company documents, these include incorporation papers, trademarks, all employee and independent contractor agreements, customer agreements, vendor contracts, details of business rates, your lease agreement, benefit plans you may have set up and whatever other documents you have signed with other parties. All paperwork should be up to date and ready to hand over for when they are required.
5. Get a business valuation
To obtain an estimated value of your business, a professional evaluation by a business broker or accountant is advised. This will help you establish a price to ask for your business, the broker/accountant will look at your industry, your target market, your position in the market, your operations, revenue, expenses, cash flow and the strengths and weaknesses of your company compared to competitors. The value of a business could vary depending on what potential buyers believe they can do with your company. A business broker can help you to package your business in an attractive way and use their network to uncover potential buyers as well as assist with the sale process from start to finish.
6. Identify key members of your team
It’s very important that you manage your staff well during the sale process so they remain on-board, especially key management that help run the business. This will reassure the buyer that there is the experience and knowledge in place to ensure a smooth transition. A new owner is likely to want to retain and incentivise key staff that add value to the business they are buying.
7. Make a good first impression
The goal is to get your business environment looking clean and sellable so you can attract more buyers into taking a closer look. Identify and correct the parts of your business that may be in need of a pre-sale improvement. Repair, update and ensure all equipment, fixtures and fittings are in good working order. Buyers look for companies that show well, an orderly business is often an indication of an orderly management team and back-room operations. An operating manual will increase the value of your business as it helps the business become more of a turnkey operation.
8. Spend your time with buyers wisely
A major reason deals fall apart is due to a buyer not being able to secure financing. Pre-qualify your buyers, ask them to provide specific details regarding what their financing plans are. Just as a buyer will want to conduct due diligence, you should do the same when it comes to the buyer’s ability to close the deal.
9. Keep your plans to sell quiet and private
Having already decided to sell your business you must continue to keep the business going, maintaining or even growing its revenues. Share your plans to sell with as few people as possible, as necessary and only when the news is communicated under a non-disclosure or confidentiality agreement.
Discuss the sale with staff members when the time is right. If word gets out that you plan to sell your business you risk creating uncertainty and discomfort among employees, customers and suppliers – all of which could contribute to a devaluation of your business at the time you need to most increase its value, resulting in either a lost sale or a buyer offering a reduced price.
10. Maintain your focus
Maintaining focus on your business is essential. It’s all too easy to get focussed on the sale of your business and lose focus on the day to day running of your business. Ensure you receive the best price for your business by keeping your focus.