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Preparing your business for sale. What you need to know.
When looking to sell a small to medium sized enterprise there are a number of important steps to take in order to prepare and ease the business sale and transfer of ownership. These specific steps are vital for a business so that it is able to remain operational with its affairs in order, and at peak performance and profitability. The process involves going through the business and its assets by examining them in high-level detail to find facets that may need the owners attention. These, to be made ready and presentable before the business is proposed to a prospective buyer in the future. This is because getting the business sale ready through substantial preparation is essential to attract and engage potential qualified buyers, so that the business sells and the seller gets the most out of selling the business. These 8 steps will help in preparing a business for sale.
Employ the right team to sell the business.
Having the right team is essential to assist in preparing the business throughout the duration of the sale process. This is because selling a business requires a significant investment of time. Creating a team to include your broker, lawyer and accountant can free up that time for the owner to focus on continuing their businesses day to day operations, instead of having a split focus. When selling a business knowledge and expertise of the market and its conditions is necessary which is why employing a broker is advisable. There are many factors to consider and an experienced broker concentrates on bringing buyers and sellers together by marketing the business. A broker is able to get an objective view and valuation of the business and where it will sit in the market. Having a lawyer and accountant on the team can help with the legal and financial preparation for selling the business. Being conscious of and managing the financial and legal business position will put the business in good stead for selling. This to go about selling to secure the best outcome and to get maximum value for the business.
Analyse and assess the business.
Analyse the business to assess how it is currently working using a S.W.O.T. profile, for which is necessary in order to better understand the businesses strengths, weaknesses, opportunities and threats. This analysis will help show potential buyers the essence of the business and how it is doing in the market; looking at its internal and external environment. To see what is being done well, what can be improved upon, what opportunities there are and can be made the most of, and if there are any changes in the market or threats apparent. Assessing the business market position will aid in future business plans and growth. This is because prospective buyers are able to see the company’s trajectory in terms of showing projection and cash flow forecasts, as banks and buyers will want to have visibility of the future picture of trading expectations.
Put together an operations manual for the business.
Having an operations manual for the business that provides a summary of how the business is conducted and day-to-day operations are handled is important. The manual will consist of standardised operating policies not limited to personnel, conduct, behaviour, health, safety and emergency processes and procedures. It will also need to include such organisational information as job descriptions, organisation positions and hierarchies, contact details, and more. An operations manual will ensure that the future buyer has a well-documented system to follow for reference as to how things work in the business. They may want to do their own due diligence with the business, so the operations manual is just a guide to make it easier for them to run the business as it outlines everything they need to do it.
Ensure the business is presentable.
Making sure that the physical aspects of the business look presentable is key. This is because curb appeal will significantly increase a businesses value. Any areas that are not up to standard need to be looked at and fixed as taking the time to give the business a spruce up can make all the difference. Improvement can be by means of repairing, cleaning or a revamp to finish off the businesses’ appearance. Making it more inviting and for a positive customer experience, thus bringing in more business. This is because having a well looked after and attractive business through a touch of tender, love and care could be the deciding factor in positioning the business for acquisition, and a buyer showing interest in the business.
Revise and update employment contracts.
Examining employment contracts is critical to retain key staff. Employment agreements should be revisited so that current employees that are important to the successful running of the business and would have a negative impact if they left, remain working with the business once there has been a change of ownership. This means that with a significant change in the business, contracts need to reflect this. Contracts that will keep employees in the mix and them from leaving which may mean providing them with incentives such as a raise or bonus to continue with the business after the seller is removed from the picture. This is because the buyer may want existing employees to stay where they are as they bring value to the business by already knowing the ropes of the business and carry out their jobs extremely well.
Revise and update customer and supplier contracts.
Examining customer and supplier contracts is imperative to maintain long-term, loyal customer and supplier contacts. Locking these key customers and suppliers into contracts before the transfer of ownership takes place will allow for the new owner to get straight into business and not worry about searching for contacts and securing contracts. This, by ensuring the customers and suppliers that the business can’t afford to lose and are crucial to the businesses supply chain are renewed. Having a transferable contract that with a transfer of ownership secures and extends this relationship and partnership in the longer term.
Ensure a succession plan is in place to continue operations.
A succession plan is beneficial for selling a business because having a plan in place with steps to run the business once the previous owner is removed, means the business can still function effectively on a day-to-day basis. Ensuring that the seller can be made expendable and that a new team are appointed and at the ready to drive the businesses’ success, to maximise value of the business for the buyer. By developing this exit plan in advance, it has the ability for the necessary steps to be taken while being able to adjust to the circumstances. So, that the transition out of the business is easy and the business can continue on its own. The strategy is able to streamline the business and create a smooth transition of ownership by showing an exit pathway and assuring the buyer that the business will be viable and sale ready.
Business paperwork in order.
Keeping business paperwork organised, accessible, and at the ready is indispensable to determine whether the business is lucrative and if it is a good purchase prospect for potential buyers. The prepared paperwork will need to back date to give a record of the history of the business so the buyer knows what they are walking into and gives them some assurance that the business will continue to operate affluently at the top and bottom line; generating revenue and profit, and therefore is a good investment for them. A good point of reference is having the paperwork backdate 3-5 years so that the historical performance of the business is well documented and gives plenty of insight. The prepared paperwork should include and is not limited to financial statements, tax returns, and legal and compliance records.
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