Selling your business
The problem
Many business owners fail to achieve the best price for their business when selling it, because they failed to follow a few simple rules while running it. But a little bit of foresight and preparation could make all the difference.
Although this is something of a cliché, a business is worth only what someone is willing to pay for it. Business owners often have unrealistic expectations of the value of their business. How many times have you seen details of a house languishing in an estate agent's window for months because it's overpriced? The same goes for businesses.
There is little point in putting a high price on a business and hoping that someone will pay over the odds; purchasers are not fools, they will have looked at a number of businesses and will quickly see that your business is not in line with the general market.
The result may be that your business does not sell, and continually advertising it makes it look stale, giving potential purchasers the idea there's something wrong with it. Even more importantly, having a business for sale over an extended period will disrupt day-to-day operations and 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. So what should you do to get the best value for it?
Check list
Grooming a business for sale
As with selling a house, presenting your business as being clean and tidy could be the difference between selling and not selling it. First impressions matter.Review your involvement in the business Make sure that it can operate without you, in terms of both management and customer loyalty. You need to have competent management in place so that the business doesn't 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 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 is capable of doing. However, bear in mind that potential purchasers will be wary of a sharp increase in profit resulting from a stringent cost-cutting exercise. 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 Your accounts should be in an easily understandable format, and 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 any additional relevant paperwork that a purchaser might want to see - such as 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 that they have the ability to market to the widest possible audience to attract the highest possible offer price. If you don't, how will you know that you got the best offer? They can also vet potential purchasers and weed out time-wasters.
Consider employing a professional You would employ a professional in your business, so you should employ someone with specialist knowledge and expertise to sell it.
Beware!
Remember that the highest offer isn't necessarily the best, especially 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.
The sale of any business is a delicate process and one which can break down at any time - unco-operative landlords may require sensitive handling, while adverse property surveys or a change in the performance of the business may require further negotiation.
Contact
Redwoods
0800 269216
www.redwoods.co.uk
