Getting the best price
The problem
Recent research from the Small Business Services office of the Department of Trade & Industry suggests that nearly a third of hotel and catering businesses will change hands within five years of trading. So if you want to sell your business, how do you get the maximum price for it?
Expert advice
Although it's something of a cliché, a business is worth only what someone is willing to pay for it.
There's little point putting a high price on your business and hoping that someone will pay over the odds. Purchasers are no fools; they will have looked at a number of businesses and will be able to tell if your asking price is not in line with the general market. The result will be that your business won't sell, and continually advertising it will make it look stale and give potential purchasers the impression that there's something wrong with it.
Even more importantly, having a business for sale over an extended period could disrupt day-to-day operations and cause you to take your eye off the ball with potentially disastrous consequences.
A business transfer agent or broker will be able to provide you with an accurate indication of the worth of your business.
Check list
- Groom your business for sale. First impressions matter. Just as with selling a house, present your business as clean and tidy - it could be the difference between selling and not selling.
- Review your involvement in the business. Make sure that it can operate without you - both in terms of management and customer loyalty. You need to have experienced and competent management in place so that the business doesn't simply disappear when you do. You may want to consider offering to stay on for a handover period, or perhaps to advise the new owner on a consultancy basis.
- Consider how to maximise your profits. Be able to present your business with a clean set of financial numbers which show its true performance. A purchaser will be buying your business on the strength of those numbers, not what you tell them you think it's capable of doing. However, bear in mind that potential purchasers will be wary of sharp increases in profits resulting from stringent cost-cutting. Purchasers need to know that any increase in profit is the result of sustainable growth and not just a flash in the pan.
- Ensure your accounts are up to date and in an easily understandable format, and they should contain supporting financial information such as sales figures, VAT returns and staff wages.
- Ensure your business records and paperwork are up to date. Gather together any relevant paperwork that a purchaser might want to see, eg, copies of your planning consent, licences, certificates, employment contracts and, in the case of leasehold properties, your lease.
- Market to the widest possible audience. If you use a business transfer agent or broker, make sure they have the ability to market to the widest possible audience in order to attract the highest possible offer. They can also vet potential purchasers and weed out the time wasters.
Beware!
Remember that the highest offer isn't necessarily the best if it doesn't result in a sale, and be sure that any potential purchasers are thoroughly vetted by your adviser - particularly for their financial ability to proceed - before accepting their offer. An experienced adviser will be able to do this for you.
The sale of any business is a delicate process. Unco-operative landlords may require sensitive handling, and adverse property surveys or a change in the performance of the business may require further negotiation - to name just some potential problems.
Contacts
Redwoods
01392 285793
www.redwoods.co.uk
Business Link
0845 600 9006
www.businesslink.org
