When you talk about your Small Business with someone you meet for the first time,…
Simplify the Sale of Your Business
So, you’ve decided it’s time for a change.
Whether you are preparing for retirement or simply ready to tackle something new, selling your business can seem like a daunting task.
However, with the appropriate preparation and forethought, you can help ensure a smooth and successful sale.
Here are six questions to consider that will help get you started:
1. Is it the right time?
First, before you even begin the selling process, ask yourself one of the most important questions, “Is it the right time to sell?” Take some time to research the market trends surrounding your industry.
As you dig into your research, consider these additional questions:
- Is your particular business still valuable in the current market?
- Is your business likely to become more valuable in the future?
- Could you sell your business for a better price if you waited?
These are just a few examples, but you get the idea. Even though it can be hard to take a step back once you’ve set your mind on selling, your patience will be rewarded with a larger return on investment if you wait to sell during a more lucrative market period.
2. How much is your business worth?
The obvious next step is to determine a realistic estimate of what your business is worth. For a set fee ranging from $3000to $7500, a certified valuation professional can review your business and its market competitors.
A typical review will take a thorough look at everything from sales to receivables, inventories and other assets, and outstanding debt or liens, all with the sole objective of identifying any business obstacles as well as opportunities that will be factors in the overall value of your business.
One thing to keep in mind is that Small Businesses are typically worth three to six times their annual cash flow. This, of course, is dependent upon their overall financial health, industry trends, market demand, location, and other factors.
3. Who can help you with the selling process?
Just because you’re beginning the process of selling your business does not mean that all of your other daily tasks and responsibilities of keeping it running magically fade away. So, unless you have been blessed with some type of entrepreneurial superpower, ask for help!
Business brokers have experience in sales and are able to assess the value of your business, network with interested buyers, handle negotiations, and hopefully secure the best sale price. Consider enlisting the expertise of a successful broker to help ensure that the sale runs smoothly, interested buyers are dealt with professionally, and the best price possible is obtained.
Brokers are also helpful at guiding buyers to financing resources of their own to guarantee the sale has the best possible chance of being finalised. The hardest part of the business deal is doing the due diligence. That’s typically where deals fall apart, and the broker provides the most value.
Just remember to do your research, ask around, and find the business broker that’s right for your business and your needs.
4. Are your books in order?
As a rule, prospective buyers are going to want as much financial transparency as possible. The most effective way you can avoid red flags from popping up unexpectedly is by working with an accountant to present clean financial statements and business tax returns dating back at least three years.
Here is a checklist of the documents you might want to have available:
- Business – Marketing plans, business procedures, employee manuals, training manuals, vendor and customer databases, equipment servicing receipts, and website details and statistics.
- Legal – Building leases, licences, patents/trademarks, employee contracts and records of employment, franchise agreements, business registration (ABN), insurance policies, and current loans/agreements. If it is a freehold sale, you will also need to provide the land title and any agreements.
- Financials – The last three years of tax returns, bank statements, and balance sheets, as well as accounts receivable/payable lists, owner’s salary, financial forecasts, stock inventory and cost price, and valuation of applicable equipment and fixtures.
5. How can you boost sales?
The more successful your business, the more appealing it will be to potential buyers. This is a great time to increase your marketing and promotional efforts, diversify your target customers, push out overstocked inventories, and get all your operating systems up to date.
This might also be a good opportunity for a makeover by brushing on a fresh coat of paint and upgrading fixtures. If you’re selling a restaurant, this would be a great time to update your menu and maybe even dismiss any unpleasant staff.
6. What’s your exit strategy?
Although it may seem odd, I highly recommended that you begin preparing your exit strategy from day one. This will allow you the flexibility to review and revise your plan throughout the selling process and then guide it in the direction that will best meet your exit goals.
This tactic also allows for any surprises that may come your way that would cause you to consider selling earlier than originally planned.
Research suggests that selling a business takes an average of six months to a year.
Take advantage of this time to continue getting everything sale ready, which will ultimately give you the best price possible.
And finally, relax. You’ve worked hard at developing a business you can be proud of, and you will soon be able to enjoy the fruit of your labour.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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