Tips when selling your business

An offer to buy your business from a competitor should be considered a   compliment, as the potential buyer’s interest means the strong   performance of your business has been identified as a competitor or   threat to the success of their own business.

If you do want to sell, you should be able to command a premium or   better than usual sale price as the potential buyer will be eager to   gain a greater share of their market and snap up your existing customers.
So before you start talking figures and contracts you should consider the following;

Knowing the value of your business

Many businesses keep profits to a minimum in order to reduce taxes,   meaning financial statements may not reflect both true future profits   and business value. It’s a wise move at the start of the sales process   to seek a realistic independent value for your business based on   reliable future expectations, to avoid selling it at below market value.

Information is key

Prospective buyers will rely heavily on the information you provide   and see this as a key indicator of how well the business has been   managed. At a minimum they’ll need to see appropriately prepared and   reliable financial statements and ledgers. Most will also seek projected   budgets for the next few years, backed by solid research and analysis

The right advice

Businesses rarely sell for a lump sum payment of cash. Instead, terms   such as vendor finance are common and can have complex tax and legal   implications. It’s timely to get advice before commencing the sales   process and to utilise this regularly during the course of the sale,   particularly prior to key decisions being made

Timing

Don’t wait until it’s too late to start the selling process.   Selecting a time to commence that’s right for you and your retirement   plans, while also being appropriate in current market conditions, will   give you the necessary time to find the right buyer. Remember, it may   take more than 12 months to sell your business!

Set formulas

There is no single calculation such as a multiple or ratio that suits   every business. Be mindful that your business is unique and requires a   tailored review and analysis to determine its potential market value,  as  well as a strong understanding of prospective buyers and the price   they’ll be willing to pay.

Get competing bids

While negotiating with only one buyer may simplify the process,   generating interest and offers from several buyers will undoubtedly   drive up the sale price and give you a range of different purchase   structures for consideration. Potential buyers in your market will often   be identifiable, so take the time to ensure these pre-selected parties   are all contacted.

Understand your buyers

Each potential buyer will be looking for different things, such as   future cash flow streams, growth potential, return on investment or   synergy. Knowing these key factors will allow you to provide information   tailored to each potential buyer and their areas of focus, so seek   guidance at the first meeting on what’s important to them.

Negotiating

Selling a business that you founded and have grown over many years   can be an emotional and complex exercise, fraught with disappointment   and contractual minefields. It may be preferable to engage a suitably   qualified professional to represent you during the sales process.

Considering the offers

As the seller, you’ll need to consider purchase offers from every   angle. These perspectives range from personal views such as any   requirement for your continued involvement in the business, to financial   options such as payment structures and ongoing financial involvement.   Naturally any sale should be well suited to your personal aspirations   and plans.

Cross the T’s

Every business seller understandably wants the sales process to be   over as soon as possible. But selling a business is one of the largest   financial transactions anyone can undertake – so make sure it’s   professionally and thoroughly documented.