6 tips for preparing your business for saleBack 23 October 2019
Looking to sell your business? Thinking about how to prepare your exit strategy and achieve the maximum valuation? You’ve ended up in the right corner of the internet because we will outline how you can best prepare for precisely these things.
However, this is not meant as a quick fix turnaround to help sell your business overnight. These preparations should be undergone several years ahead of your anticipated sale date if possible. Essentially, as with most things, the longer you can give yourself to prepare, the better the outcome.
Know your objectives
For someone else to see the value in buying your business, you first must decide why you want to sell it. There is a common cultural stigma that if something is for sale then there must be something wrong with it. Our first thoughts often interpret the sale as an illogical action, because why would anyone want to sell a successful business? But, what we forget is that for some business owners, the plan all along was the successful sale of the business to help them fulfil other aspects of their life.
It is important to communicate the reasoning behind the sale, as not having clarity could cause suspicion. What do you want to achieve from the sale? Are you looking for the biggest pay-out? Perhaps you want to sell it as quickly as possible, or maybe you are looking for someone who fits your ideals whom you can trust to carry on the great work of the business once you retire? These are all viable reasons and it’s important to note that not all of them are rooted in financial goals.
Whatever your reason, once you have it you are in a much better position to define your exit plan. This also helps you to define your ideal buyer and take practical steps to make the business as attractive as possible to them.
Seek a business valuation
Do not omit the importance of obtaining a professional valuation of your business from industry specialists. Whether it be a broker or accountant, they can take your objectives into account and create an assessment on your position in the market. Without this, how will you know what your business and associated assets are worth? Don’t go in to the negotiating room blind.
But, there is nothing stopping you from doing your own research alongside the professional valuation. As mentioned earlier, the more preparation the better the outcome. Put your detective hat on and look around, check trade publications, company records, news pages, whatever you can find. Try to investigate recent sales of businesses similar to yours. This could provide you with an indication of a good time to sell and give you some ideas about what you could be doing to add value to your business.
Get your accounts in order
There is one major thing which instils confidence with your buyers, and that is accurate books. No one wants to inherit a financial mess. It is essential to ensure that your figures are spot on. At the very least, buyers will look at the historic income of recent years and compare it to your costs. Your potential buyers will require full transparency and readily available:
- Company reports
- Historic turnover and profit records
- Asset valuations
- Any liabilities or debts
- Realistic profit forecasts
- Incorporation documents
- Details of any leases and contracts
All the above are of interest to your buyers and the better you can present them the more they will trust you.
This is not a complex step but something that an astonishing amount of businesses forget. First impressions can make or break a sale, don’t neglect them. Make sure your premises are spotless and that your employees are appropriately attired. This helps to convey an organised and smart business culture.
It could even end up adding value to the final sale price. Someone who has greater respect for your business is more likely to agree a higher sale price.
Look at your methods and define your processes
As the owner of a business, over the years you’ll have likely developed your own ways of carrying out certain tasks. Do your methods make sense to everyone else? Could your methods be easily adopted by the new prospective owner? If not, you need to take a step back and look at your processes from an outsider’s perspective.
Try to streamline your methods and create replicable procedures which can easily be handed over. Document them, even. This demonstrates to the buyer that the business is organised and structured in a sustainable way which indicates the potential for a smooth transition under new ownership.
Double-check, triple-check, quadruple-check the small print
With your business exchanging ownership there will be lots of small print to check. Scour through all legal documentation before presenting your business to market. Pay particular attention to:
- Employment contracts
- Supplier terms and conditions
- Legal contracts
Don’t forget intellectual property. The buyer will be sure to check that they will receive the right to use any trademarks or patents associated with the investment. In fact, often this can be the main motivator in the purchase. Make sure they are up to date and that they are clearly outlined for the buyers.
To wrap up…
It’s important to remember that these things take time, especially if you want to present your business in the best possible light to achieve maximum sale value. Replacing old habits with new systems, going over every detail of your contracts, meticulously laying out your records and accounts. These are just some of the things you need to do when planning your exit strategy and preparing your business for sale.
Final thought, to make your business look like a viable investment it has to actually be successful. Smoke and mirrors will not hide the financial facts. This part is very much up to you, but accountants can help. The more you involve your accountant in your business, the more they can help it to grow. So, get in touch and let us join your business journey, because our mission is your success.