Prepare Well To Sell
With the new financial coming to a close, there will be many business owners going to their accountant to have their end of year figures completed shortly and some may be considering whether to put their business on the market.
With every business seller wanting to get as much money as possible, taking the time to prepare your business for sale can be a big factor in how much you walk away with. Here are some tips to make sure that your sale starts on the right foot.
Seek tax advice- Find out in advance from a tax professional what your tax obligations will be when you do sell.
Clean financial records- A buyer will engage several professional advisors including an accountant, solicitor and financial advisor. During the sale they will insist on seeing all the revenant information pertaining to the business. Ensure your financial records are up to date to clearly demonstrate the true profitability of your business to a potential buyer. Your business broker will help you present these in a professional manner.
Minimise the businesses dependence on the owner- Buyers want to know that the business will continue smoothly after a sale is complete so make it easy for them to step into your role. If you have all the knowledge and skills to run the business, a buyer's greatest fear is that the business will walk out the door when you do.
Comprehensive documentation- Document and systemise all business activities as this will reduce the reliance on any one employee or operator. Also document any relationships which are key to your business. Convert any verbal agreements with suppliers and clients into written agreements wherever possible. Written agreements will make your business look stronger and build confidence in potential buyers. Examine existing contracts with suppliers and customers to ensure they will not expire or require renegotiation just as a new owner steps in.
Keep stock levels under control- Most buyers don’t want a business with high working capital requirements so keep stock levels to a minimum. Selling off obsolete, or slow moving stock items will keep your buyer happy and will eliminate any possible arguments over the valuation of stock during the sale.
Don’t let your debtor’s blow out- Collect all payments that are overdue from your clients. A Buyer will base their cashflow and working capital projections based on your debtor levels and It will be a major concern if your customers are taking a long time to pay their accounts- nobody want to do business with people who don’t pay.
Tidy up your premises and equipment- You don’t get a second chance to make a first impression. The appearance and presentation of your premises can be a reflection on the business itself. Ensure that your business complies with all legal requirements including OH & S and health regulations. Make sure that all plant and equipment is well serviced and maintained.
Offload surplus fixed assets – Most businesses are valued on their profits so it you own assets that do not contribute to profit, sell them off. A purchaser will not pay extra for a vehicle that is simply sitting the car park or an old machine that is now redundant.
Good Lease- Ensure that you have a good lease with a long tenure period or further options in place-banks won’t finance a business that doesn’t have a secure lease. Also buyers want to know that if the business is location dependent that they can continue to trade there well into the future and still have time ahead when the time comes for them to sell.
You only sell your business once and you've only got one chance to get it right. Nobody wants to regret selling a business for less than it's worth due to poor preparation. Put in the time required upfront ant you will be rewards with a better result at the end.