When selling your business there are a few things you should take care of first to ensure that you get the best deal possible.
Follow the steps outlined below to ensure a desirable result.
Get the results you want!
Due diligence processes when selling your business take a long time and consume valuable resources that cannot be used elsewhere. And they often do not produce the results you want!
Out of the approximate 500,000 small and medium sized businesses (SMEs) that are put on the market for sale in Australia every year, a significant portion never sell.
And of those that are sold, many are sold for less than the previous owners initially expected.
If you are aiming to sell your business, but not quite sure if you are ready for sale, then you could run the risk of not selling or underselling your business by not being prepared.
Know yourself…from the other side
You know you have a great business and buyers should be queuing up to offer to buy it, right?
Well, that would be great, but you may have this view exclusively and it is up to you to convince potential buyers that what you have is worth top dollar.
Put on the acquirer’s hat…Would you catch a falling knife?
Would you buy a business that is losing money, stagnating or even shrinking? And if the answer is ‘yes,’ would you pay market value, or would you use this distress to negotiate the price down?
Also, what would you think as a potential buyer, feeling the business owner does not know down to the last cent where the money in the business is coming from and where it’s going to?
And finally, assuming the business has been growing for the last few years and the business owner knows their numbers inside out, how much (if at all) would you pay for a business whose success is not identifiable after the acquisition has been made?
Would you take the risk, or would you walk away to look at one of the other approximately half a million businesses up for sale?
Stand out – Be ready for sale
In my previous article, I have outlined the various reasons why business owners who aim to sell their business sometime down the track should start preparing NOW.
If you want to achieve the best possible deal, get ready for sale before putting your business on the market!
Being ready for selling your business means:
(A) You are running a successful business
(B) You can prove you are in full financial & operational control
(C) You can demonstrate your business is future-proof
How to prepare your business for sale
So, what can you do to increase your chance to pass the due diligence process and sell your business successfully without wasting valuable resources?
1. Show your business is successful and growing
You will be in a better position to sell your business when you can present financials and explain last 3-5 years’ evolution of growth.
If this is not possible, be prepared to answer questions why profitability has decreased, or revenues have stagnated/ shrunk. Point 3 below becomes even more important.
2. Prove full financial and operational control
Know your numbers, determine a budget and work with a forecast.
Implementing a quality financial reporting covering actuals, budget and forecast informs business owners and acquirers at a glance about where they are, where they should be and where they will be.
3. Demonstrate your business is future-proof
The better you can explain the potential acquirer’s return on investment, the better your position during the sale negotiation.
A comprehensive post-acquisition scenario will support you getting the best deal. Present a business case to the acquirer, showing how his/ her investment could be paid back over the next 2-3 years.
The growing pool of unsold and baby-boomer businesses puts noticeable pressure on business owners and prices.
Preparing your business for sale or starting the discussion before putting it on the market, increases your chance of selling it at the best possible price.
Time better spent – Connect with Arvind
Preparing your business for sale and increasing its value at the same time is part of ‘future-proofing’ your business and having it ready for seizing YOUR next opportunity, whether it is an exciting acquisition, planned succession or a lucrative sale.
If you as a business owner feel you need help getting ready for sale, please get in touch. I also invite you to visit my website; for information straight to your inbox, please subscribe to my newsletter here.
Tomorrow you will wish you had started today!
