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Preparing Your Business for Sale
Preparation is the key to executing a successful sale. The more groundwork you put in before you present your business to the market, the more professional you’ll appear and the more credibility your company will gain.
At LINK, we believe in following a steady process so you may sell your business smarter. We hang our hats on nine practical steps that will help make the selling process as seamless as possible, the first of which is crucial to your preparation – planning!
In an ideal world, you would plan for the sale of your business from day one, even if you’ve never thought about selling before, there are steps you can (and should) take to set you up for success. Perform a thorough analysis of the fundamentals; clean up your financial records, review your succession plan and avoid unnecessary spending. Your goal is to maximise profit and structure the business to enable you to transfer ownership with minimum impact on operations and profitability.
Timing it right: If you can, sell when the business is running at peak efficiency, with a solid record of profits trending upwards. Have you trimmed costs, increased sales and margins, restructured and/or reviewed other variables to get you there?
Are your records in order? For some business owners, their impeccable, detailed accounts are a source of pride; for others, less so. If you fall into the latter category, now is the time to get them shipshape; this includes records relating to contracts, customers, staff, leases, asset ownership and more. Ensuring your books are up to date – with supporting facts and projections – gives a buyer a clear picture of your operation. We can help you prepare a set of ‘normalised’ accounts to show maximum operating profits, as well as your actual accounts. This means adding back expenses or purchases (sometimes personal) that are not directly related to operations – and being prepared to discuss these with potential buyers.
Business or pleasure? Review any personal items paid for by the business, such as travel or entertainment. Separating personal and company expenditure can make a big difference to the selling price. For example, a $20,000 trip paid for by the company is essentially $20,000 off the bottom line and could reduce the sale price by three to four times that amount.
Accounting for taste: Accounting policies vary widely – and yours may differ from other businesses within your industry. They may be tax-driven policies, resulting in conservative profit recognition, or earnings-driven, to maximise profit. Making sure your accountancy policies conform to those generally adopted by your industry can increase the market value of your business.
Stay or go? A business is more attractive if its success isn’t solely dependent on the owner’s operational know-how, technical skill or personal relationships with clients or suppliers. Having an experienced, reliable management team demonstrates that the business will remain successful post-sale. Most buyers expect the seller to keep working in the business for a handover period following the sale. This could be anything from two weeks to up to a year or longer, particularly if you’re critical to the business. This can be negotiated and included in the Sale and Purchase Agreement. You may wish to stay involved in the business indefinitely. Consider what might work best for you before you prepare to sell.
Invest for success: When looking at a business, buyers will factor in both its debt level and asset quality, particularly in manufacturing operations. Generally, we recommend you continue investing in the business as if you weren’t selling.
Will you offer finance? To help you achieve maximum value when selling, consider leaving some finance in the business. It gives the buyer extra confidence, knowing you’ll continue to have an interest in maintaining its success.
Our proven approach to successfully selling any business is based on experience and skilled negotiation. The decision to sell your business could be one of the most important you ever make; it’s our job to ensure you have all the information you need to walk away with a great result!
We invite you to download our 9 Steps brochure to unlock the additional steps to that will help you sell your business smarter!