Are you fed up to the Back Teeth with your Business?
Make sure you get the price of your Dreams!
Is your New Year’s Resolution to “get out”?
Then optimise your sale price using these tips.
Firstly, don’t rush into this – a good sale price needs a bit of preparation – just like selling a house!
If you are simply overworked and a bit burned out, then a good place to start is by taking a break from your business so you can get a clear perspective before you make the massive life change of selling. Oh, and if you are screaming “I can’t get a breeeeaaak” then have a look at these Top 4 Vacation Blockers and begin by clearing those – they all assist with improving your sales value at the same time.
11 Business Sale Quick Tips
As a business owner, you have gone the hard yards, worked the extra hours and put in the risk and effort – sometimes that can impact how you feel about your business and therefore how you value it. Remember to consider how others will unemotionally perceive what you are selling.
1. Be clear about How to Exit
Selling isn’t the only business exit option, there are other strategies that may be more applicable, so remember to start by deciding the “How” of your exit:
* Step Away – declaring bankruptcy, and/or being placed in Voluntary Administration, involve immediately replacing both control and management
* Close it up – “shutting up shop” and walking away
* Give it Away – transferring the ownership of your going concern to family or staff member for no return
* Sell – undertaking a commercial transaction to transfer ownership
2. Understand what impacts your Business’s Value
When you have “nothing” to sell there is no possibility of a sale. Have a realistic understanding of the value of your business is vital to establishing what actions you need to take. Surprisingly, many owners think their business is worth much less than the market will be willing to pay, usually because they are “worn down” by years of hard toil – don’t let your weariness be the cause of a devalued sale.
3. Consider Possible Potential New Owners
No sale can happen without a buyer: – selling isn’t just about price, but also about the market. Each potential buyer will be looking at slightly different aspects, such as future cash flow streams, growth potential, return on investment or synergies; knowing these key factors will allow you to prepare appropriately. If you have a very specialist business it may take time and effort to find the appropriately enthusiastic and qualified buyer – remember to consider your competitors as potential buys too.
Like many big leaps, success is primarily in the preparation. The more prepared the business is prior to the commencement of the sale process, the smoother and usually more successful the subsequent process will be.
4. Tidy Your Books
Make sure all your tax returns are up to date, and your business reports clearly differentiate between “necessary” business expenses and those that have occurred at your discretion. This is probably the most important step in establishing a strong selling price, but is necessary in other circumstances. Also be sure to create two clear contact lists, one of suppliers you have used in the past (or recommend) and if possible one of your customers (your accounting system will probably have many of these details) so the business sale can be communicated and celebrated.
5. Clarify Personal Assets
That favourite stuffed moose head in reception that you brought with business funds at a convention is a Business Assets and therefore part of the sale. Cars are regularly packaged as Business Assets for tax purposes, so don’t get left without wheels the day after the sale. Review the things you want to keep and itemise them as excluded from the sales contract – remember removing assets may also have an impact on the ultimate sales price.
There is a caution here: do not remove assets if you are considering liquidation – untimely removal may be considered theft!
6. Lock in systems and processes
If the business relies on you and only you then it will not be very sale-able. Every new owner will want to see “how we do it here” so they can keep or improve on things accordingly. The more work you do to create systems and processes the broader your market because people with limited prior experience can use your resources to learn your trade. If there is a bigger market you can push up your price because a good manual will enable people outside your industry to succeed.
7. Gain Staff Support
For the same reasons as above, your business needs to be able to run without you so preparing your staff for change is vital – not everyone may be happy with your decision to exit. Ensuring you create continuity after sale and retain “business deep smarts” for the new owner will improve your sale value. Remember too that if you are considering closing, you need to give employees appropriate notice and may also need to provide termination payments.
8. Understand the Tax implications
Tax is complex, so get good advice and do lots of research to ensure the best fit exit and tax strategies. Both sides of the coin are important here – you don’t want to pay the tax-man too much, but shorting your tax bill will land you in hot water.
Another aspect of this is if you have been “minimising your profit to save tax”. Tax reduction and optimising your business value are often opposing financial goals – decide early which one remains the most important now you want to sell your business.
e.g. a new business owner may not want, or need, to travel to Italy annually even thought this was part of your expenses; as this will impact how a new owner will calculate profitability it is important to identify it as optional.[/twocol_one_last]
9. Selling “dust and all”
Just like selling a house, a bit of a spruce-up goes a long way to improving appeal. If you have had a gut-full and “just want out” it may be worth paying a handyman to apply a lick of paint, or consider hiring a commercial cleaning team for a day. A very simply “filing bee” may be all that is needed to give staff time to clear their desks and archive old files giving the place a fresher look.
10. Create some Hype
While you may not want to slap up a “Business For Sale” sign on the front door – a booklet describing the business for buyers to determine whether they are interested or not in pursuing a purchase. Don’t give away all your trade secrets, interested buyers can ask for more detailed information – your broker will help you with this, or there are plenty of templates on the internet – e.g. Selling Memorandums by Inc Magazine. Also doing some networking at relevant trade shows, to “get the word about” to people who are like minded can also be beneficial.
11. Assess Legals, Brokerage, etc
Consider at least using a lawyer to draft all your contracts including a Heads of Agreement, plus if you are selling there is also the choice of using a business broker or not. Decide early about who you want to use, and what tasks they will do, as these decisions will impact the amount of work you need to do yourself.
*If Bankruptcy and Administration are your only option then the new management will handle all of these factors and undertaking any of these steps may land you in legal trouble.
Exit Pitfalls are easily avoided and exiting your Business can be a good experience, as long as you are well prepared!
Now that you have a taste of what we can do… here are some more options to improve your business profits: