| Preparing To Sell - Advice For Those Wanting To Sell Their Business |
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Here is our advice on some of the things which should be done to prepare a business for sale. Being prepared is the key to maximising the value of any business as well as ensuring that the sale goes as smoothly as possible.
Here is our advice on some of the things which should be done to prepare a business for sale. Being prepared is the key to maximising the value of any business as well as ensuring that the sale goes as smoothly as possible. When planning to sell a business, it is important to remember that selling a business can take up to 12 months and may involve on-going commitment during a transition period. 1. Value your business It is important to understand a realistic value for your business as the very starting point for any divestiture process. Any valuation needs to be objective, industry specific and from an external source. A business valuation will give an pricing range and will allow you to understand how different bids compare to the market value. It will also tell you your company's competitiveness, financial situation, weaknesses and strengths. Obtain a valuation from an accountant or an experienced business broker. The organisation performing the valuation must have access to current accounts and forecasts. Most importantly, any business broker needs to understand current industry sentiment and having a clear sector understanding is imperative. 2. Accounts A buyer is most likely to need 3 years of accounts. If your accounts are professional and well prepared you will make a much better impression with the potential buyer. Well prepared accounts also make due diligence simpler, quicker and cheaper. 3. The bottom line Many small and medium sized businesses claim a variety of non-operational expenses. Understand what these expenses are and have supporting documentation to justify their exclusion. If there are one-off expenses that the company has incurred during the past 3 yrs that should be excluded from the recurring cash flow. 4. Financial advice A good financial expert will help you understand both the personal and corporate tax situation which is imperative. Understanding your tax situation will determine timing and also often influences the structure of the deal. 5. Documentation Review your incorporation papers, permits, licensing agreements, employment contracts, leases, customer and vendor contracts. Make sure they are readily available, current and in order. 6. Succession planning If the owners of the business are absolutely vital it is important to know who will support a buyer after the divestiture transaction. There should be a succession plan in place before going to market. It is particularly important to show how any day-to-day responsibilities of the current shareholders can be picked up by other resource post acquisition. 7. Divestiture motivation Buyers always want to know why you are selling. Be prepared to articulate your reasons and make sure they are genuine. 8. Build your advisory team Strongly consider hiring an intermediary, either a business broker or an investment banker, to represent you and help you through the selling process. Start interviewing business brokers, legal representatives and accountants who are proficient in mergers and acquisitions. Most importantly concentrate on the business' core activity and do not become caught-up with the selling process. If your business does not perform as well it will give the buyer every reason to lower the price. A good advisory team will understand your need to focus on running the business and will allow you to do this. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Mr Baker is a Founder at Beanstalk Management with over a decade of experience advising businesses. For more information review the Business Brokers section on his site. |