Have you started to contemplate the
eventual sale of your business? Never sold a business before?
Here are five essential tips to help you
prepare the business for sale, find a buyer and achieve a deal on price and
terms that you’re happy with.
1. Value the business
Get an accurate valuation of
your business from a trusted source. Valuing a small business
is much more complex than valuing a house as there are so many
variables – encompassing not just the value of your premises but also that of
your revenues, stock, brand, employees and more besides.
The best thing to do is to
use a business broker with experience of valuing businesses – ideally in your
sector – or one who can refer you to a valuation expert who can.
This is by far the best way
of adding credibility to your eventual asking price. You will almost certainly lack
the objectivity and knowledge to value the business yourself.
2. Create a high-impact advert
Making your business sound as
appealing as possible to prospective buyers while maintaining the confidentiality
of sensitive information can be tricky. It's not advisable to hand over every
piece of information in the initial advertisement that you post online –
although your competitors would love it!
Rather than publishing your
profit-and-loss accounts straight off, burnish your business’s appeal by
including in your advert professional photographs of the premises and/or
products (it’s not worth skimping on this) and unique selling points – for
instance “lots of repeat business”, “great lifestyle business”, or “scope for growing
revenues by extending opening hours”.
The name of the game is to
attract buyers quickly and discreetly. Prepare a selling memo: a guide to your
business that details its current status and offers a tantalizing glimpse into
its future prospects.
It is quite reasonable to ask
buyers – once you are satisfied they have the finance and motivation to close
the deal - to sign a confidentiality agreement before releasing your selling
Ask your business broker to put together a document.
Use the services of a
reputable firm of business brokers, such as VR Business Brokers, who will give
you invaluable guidance on showcasing your company to give yourself the best
chance of a quick sale at the highest price possible.
3. Respond to enquiries promptly
Every small delay to the
sales process can dampen the buyer’s enthusiasm and stall momentum.
Unreasonable days can even prompt the buyer to walk away.
Responding to enquiries
promptly is the best way to prevent 'deal fatigue' from setting in.
risk of deal fatigue by having all relevant documentation – legal, financial
and otherwise – in order and readily available before you put the business on
the market. Also reply to any
enquiries in a timely manner.
Of course, some enquiries may
take some time to address – for instance, if submitted on a Friday evening and
the information requested can only be obtained from the IRS between Monday and
No matter. An answer like
this will at least give the buyer an idea of the time frame: “Thank you for
your enquiry. Unfortunately I can only obtain that information during weekday
hours so I will respond early on Monday. Thank you for your patience.”
Again, an experienced
business broker can help you keep delays to a minimum, by advising on how to
respond to enquiries, and manage the buyer’s expectations.
4. Think about the timing of the sale
Ideally, you will begin to
prepare for the sale of your business at least six months in advance. The more
time you have to prepare your premises, processes and paperwork to effect a
smooth transition to a new owner, the better.
This means getting your books
and records tidied up and up to date. It means enhancing first impressions – so
cleaning your premises and maybe giving them a lick of paint.
It means renewing customer
contracts that are set to expire soon. It means seizing any ‘low-hanging fruit’
in terms of growing revenues or cutting overheads.
The better your financials
look, the higher the price you can get.
Finally, how dependent on you
is your business? If much of your custom is dependent on your skills or
personal relationships with customers, then you need to disentangle yourself gradually
from the business in advance and put measures in place to minimize disruption.
A business broker can help
you with all of these tasks.
Once you have a picture of
how long the above steps might take, then you can decide on a reasonable time
frame for getting the business in a sale-able condition.
5. Consider using a business broker
We’ve already touched on the
benefits of a business broker in the first four tips. And that is precisely the
point: they really can help you with every part of the selling process.
A competent, experienced
broker will help you sell the business with confidentiality and reach a larger
pool of potential buyers.
They can negotiate skillfully and objectively with the
buyer on your behalf, thus taking any emotion and inexperience out of the
They can also help you value
your business, get your paperwork in order, screen buyers and more.
It will cost you money of
course – in fees and commission – but will save you time, freeing you up to
concentrate on keeping the business in good enough shape to sell.
And if you choose your broker
wisely and heed their advice, then it may well save you money overall anyway –
because you’ll have a greater chance of maximizing your sale price.
By Bruce Hakutizwi, USA and International Accounts
Manager for BusinessesForSale.com, the world’s largest online marketplace for
buying and selling small and medium size businesses. Bruce has over 7
years’ experience working within the US business transfer marketplace
connecting buyers and sellers.