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How to sell a business

Sellers can be faced with buyers who one second seem interested in their business for sale and the next, go stone cold. Our experience suggests that sometimes the fastest way to puncture a buyer’s enthusiasm, is simple house keeping. Selling your business is probably the biggest sale you’ll ever make and it’s important that we prepare our business for sale just like we would when putting our property on the market.


MAINTAIN UP TO DATE FINANCIALS

Buyers like to see recent information usually at least two months old so it’s good practice to keep on top of your financials including records of your sales pipeline, creditors and debtors. This will show a buyer how your current and future trading is likely to turn out and whether the sale of your business has affected trade. It will also reflect on how you manage your business. Accurate and up-to-date information indicates that you are running a tidy operation and makes a buyer feel more confident in being able to walk in without having to tidy up first.


MAINTAIN PRODUCTIVITY AND NORMAL BUSINESS TRADE

Prospects must see your business at its best and most productive. There is a tendency for some sellers to wind back or lose focus when they have their business for sale. Buyers need to see that your business is busy, making money, and generally moving in the right direction. They aren't likely to want a business that is losing income,its competitive advantage or any of the things that attracted them to the business in the first place. It's extremely important that you continue to run your business with expansion and growth in mind and make the most of your decisions based on the long-term benefits of your business; as if it weren't for sale. Buyers are more likely to fight for your business if there's increased value and other buyers want it! Increased competition means more likelihood of achieving the higher sale price! Don't forget to keep your normal operating hours.


CONFIDENTIALITY

Our experience suggests that confidentiality can achieve a much better result when selling a business. Avoid telling others that your business is for sale. Key staff might leave reducing productivity and value to a prospective buyer. Internal theft may occur. Suppliers might lose confidence and go somewhere else. Competitors can use this information against you. Customers may leave and your sales will drop. You need to protect and build the image value of your business to prospective buyers.


HOUSEKEEPING

Similar to preparing your property for open for inspections, look at cost effective ways to freshen up and organise your business for sale without over capitalising. Repair signs, replace lights, clean the premises, remove dust (including dust on stock), organise and label items, remove clutter, dress up your presentation and know where everything is (including your financials) in case you need to quickly access or point out items. Your business must look its best and any negative features should be eliminated before an inspection.


STOCK CONTROL

Unless advised otherwise, you should maintain your stock at a normal level, keep it fresh, clean and properly displayed. If possible, remove stock that isn't included in the sale of your business.


INSPECTIONS

No one knows your business better than you do, so if using a business broker and where indicated by your broker, please help in physically showing your business. Answer the buyer’s questions and be prepared to discuss the day-to-day operation. Ask your broker advice on how best to conduct yourself and respond to questions. DO NOT discuss the purchase price or sale terms; defer these questions to your broker. Tell the prospect, "My Broker knows what I am asking and the terms I want. He/she will discuss them with you after our meeting". DO NOT meet with the prospect without your broker present as this can put you in a compromising position. Brokers are bound by Australian legislation and the PAMD Act to work in the best interest of their clients and achieve the maximum sale price for their business. Their job is to get you the best possible deal and you need to put faith in your broker.


ESCORTING BUYERS

Buyer inspections should be conducted by pre-arrangement and conducted at an appropriate time when you can give them your full attention, control what they see and who they speak with. Try to organise the inspection at a time when the business can be seen in its most attractive light. This may not always be possible especially when you need staff and customers to keep the business looking busy whilst attempting to maintain discretion. Try to be clever with your reasons as to why you have a visitor in the premises. Buyers turning up unannounced can usually be an effort to catch you off guard and attempt to drive your price down. If a buyer turns up unannounced, tell the buyer that employees do not know that your business is for sale and you will be happy to meet with the buyer at a more convenient time. Be polite and professional but forceful about this point as you show them to the door.


OFFERS TO BUY YOUR BUSINESS

Experienced and astute buyers will usually make low initial offers to ensure that they are going to get the best possible price for your business. Do not feel insulted by low offers; this is just a starting point. The prospective buyer that makes a low offer may be the prospect that eventually buys your business. Follow the market and listen to advice given to you by your business broker (if You're using one). They will know what businesses are selling for and have feedback from buyers who are considering your business amongst others they have seen. Start to think about what price you're prepared to sell your business for and if that price is not out there, start to think about whether you're prepared to spend anymore time and money on your campaign to sell your business.


BE PREPARED TO SETTLE QUICKLY

Once an agreement is reached between buyer and seller, buyers generally want to settle as soon as possible and you should be prepared to settle quickly too. Key staff, customers and competitors can react in different ways when they hear your business is for sale or under contract. The sooner the new owner takes over, the sooner some of these fears and anxieties will go away and the less impact the sale of your business has on trading. If there are actions that you have deferred such as, maintenance or repairs, you should take care of them at once. There will be a lot to do as settlement approaches so everything that can be done in advance of your business sale should be done now.

 

Copyright. This material has been written by BizClassifieds and is not to be used or duplicated in part or full.

Disclaimer: The information provided above is to be used as a guide only. No person should rely on this information. BizClassifieds recommends persons seek their own professional advice, and accepts no liability for any loss or damage which any person or business may suffer arising from any negligence on our part.