Businesses are sold every day, but selling a business is not always an easy process, unless you are well prepared and have ticked all the right boxes. So let\u2019s take a look at 5 questions you need to address, before you sell your business, to ensure that the selling process runs smoothly and you achieve the best results.<\/p>\n
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You need to determine whether selling your business is not just a knee jerk reaction to a run of difficult business or personal circumstances, or a gut feeling, or whether it\u2019s actually a sound financial decision for the future. Some negative situations can be compounded by putting the business up for sale in order to \u2018just to see what happens\u2019; particularly if you have overly high expectations regarding what your business is worth, and also wrongly assume there is actually a market for your business, when there isn\u2019t. On the other hand, you might be considering a \u2018planned sale\u2019, which would include consulting a professional business broker, your accountant and solicitor before selling.<\/p>\n
Selling because you are seeking to change your lifestyle and\/or you are ready to retire and maybe want to take that trip you have always promised yourself are valid reasons, and there is little doubt that selling your business is often the compelling scenario to help boost your retirement coffers, or help leverage your way into other investments or another business opportunity. However, you need to be sure that you you\u2019ve made a \u2018thought out decision\u2019, and got the right advice from those who know what the market for businesses is actually doing.<\/p>\n
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Just because you want to sell your business, doesn\u2019t necessarily mean you\u2019re ready to list it right away. It\u2019s really important to get your paperwork in order when considering selling, so everything is at your fingertips to show potential buyers when they ask questions. You will need at least the last three years Profit and Loss Statements, two years of Tax Returns, some BAS statements, a copy of the lease and an acceptable time period left on the lease, knowledge of your stock level and its cost, and finally, have a handle on the secondhand value of your Plant and Equipment. It is also a good idea to prepare a competitive analysis of your company, a demographic profile of your clients, and market position information to help provide buyers with more evidence of your business\u2019s viability and any growth potential.<\/p>\n
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You being ready to sell your business doesn\u2019t necessarily mean that it\u2019s the \u2018right time\u2019 to put it on the market. Therefore, you need to talk with someone who is \u2018in the business of selling businesses\u2019, knows what the\u00a0\u2018market demand\u2019<\/strong>\u00a0is right now, and what the different types of businesses are realising. \u00a0So it\u2019s best to discuss how the market is travelling with an experienced business broker who belongs to a reputable brokerage and has a long history of sales on the board.<\/p>\n Selling a business depends on a number of different factors, and one of these factors is definitely \u2018the timing of the sale\u2019 \u2013 it\u2019s best to sell when your business\u2019s earnings and turnover are on the rise, rather when the business is in decline. Of course, if your business is in decline and you still want to sell, then that may mean you might still find a buyer, but at a lower price than you anticipated.<\/p>\n Another consideration is that some businesses trend in and out of fashion, so sometimes waiting a year or two until consumer interest is reignited may be an option. This may sound like a better strategy in theory, however sometimes in practice, you could find yourself in the same position or even worse off, and receive an even lower price for the business in the future or than now. That\u2019s because the business may decline even further over the period. So be aware that other unforeseen factors may emerge whilst you are waiting for a business to trend back in.<\/p>\n <\/p>\n Some businesses are built around a family presence or a particular owner and therefore can have trouble overcoming this negative or \u2018risk factor\u2019 when selling. Therefore, if you are wishing to sell your business, you must demonstrate to potential buyers, how the business will function effectively and survive without you being in it and prove you are not the primarily focus of goodwill for the business, i.e. ask yourself how well does the business operate when you are on extended leave for instance?, do you need to train and promote a staff member?, or restructure in some way?<\/p>\n Buyers can be wary of a \u2018situation\u2019 occurring when an old owner leaves, which can lead to a loss of turnover, profits, clients, and inevitably market share, particularly in the short term until the business has rebuilt its reputation without the old owner being around. A wise buyer and his advisors will be aware of this problem, so it\u2019s up to the current owner to demonstrate that the business is not dependent on them or any one person and that all things being equal, it will continue to turn a profit, long after the sale is completed.<\/p>\n This is also why selling a business often requires the current owner to offer a reasonable hand over period to allay buyer fears and minimise risk perceptions. It is also why you need a competitive analysis, so you can demonstrate that the success of your business is due to your marketing strategies, current client base, product offering and market positioning, or business uniqueness, rather than any personal traits of the owner.<\/p>\n <\/p>\n Selling a business is not always easy on your own, so it pays to put together a team of professionals who can help you navigate the sales process. To ensure a smooth sales strategy, you will need an accountant to organise all of your financials, a solicitor to help you through the legal requirements of selling a business, a business broker\/appraiser to assess your business and provide a likely selling range, and then a business broker to again help find potential buyers and present the business professionally.<\/p>\n4.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Will the business overcome you leaving?<\/h2>\n
5.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Who do you need on your sales team?<\/h2>\n