Preparing a Business for Sale

Preparing a business for sale

When preparing a business for sale, history has shown us that there are two conditions that indicate it is an ideal time to sell:

Your business is doing well and making money

When buyers are active

Of course, these conditions do not often occur at the same time, which makes it crucial when preparing a business for sale that you capitalise when they are.

You should be aware of your annual financials, the position of your business and whether the direction is positive. It is important not to fall into the trap of waiting for your business to suffer to consider selling – even when buyers are active, they will be looking for companies with high potential, not those appearing to be heading downward.

Whether you are preparing a business for sale now or several years from now, the most important thing you can do to have a smooth transition is to have a plan from the beginning.

Keep in mind that you may not always get the price you want. You may have an unrealistic price in mind, but in many situations, the price you want does not always match what a buyer is willing to pay.

Selling a business is a complex process, you have to keep your emotions aside and separate your personal expenses from the business and get everything in writing.

Get a business valuation. One of the first things you should do is obtain a realistic idea of what your business is worth from an objective, outside source. A professional valuation will give you a basis for gauging buyer offers and will give you an idea of what you can expect to net from the sale. It will also tell you your business’s market position, financial situation, strengths, and weaknesses (which you can hopefully correct prior to putting it on the market).

As a rule, you should make sure the company performing your valuation has the expertise and experience along with the qualifications to perform business valuations.

Secure your intellectual property. Check that the trademark for your business name and logo, and any other valuable business assets, are secured so they can be included as part of the sale. Learn the steps you can take to protect your intellectual property.

 Know your reason for selling. Buyers are always curious as to why a seller wants to exit a business. (If it is so great, why are you leaving?) Be prepared to articulate your reasons.

Keep it discreet. If you are in a business where a sale may send your customers or clients into panic mode, it’s probably best to keep an impending sale quiet until you have identified a buyer and finalized the details of the sale. That includes determining how you will transition your customers to the new owner. 

Hire a professional business broker to help you with listing your business for sale. A business broker will help give your business market visibility where you want it and will increase your chances of finding the best fit. A broker can also help you set a realistic asking price and help you with marketing your business and contacting potential buyers on your behalf.

Set a realistic asking price. If your business is doing well, it can be tempting to set an extremely high asking price. In reality, there are many factors that buyers will look at when considering a purchase. Consider how all of these things will factor in and how you would view the business from all angles if you were the buyer. Consider profits, client relationships and the personal investment of time that will be required for the new owner to make the transition successful and set your asking price accordingly.

Get the paperwork in order. The legwork for the sale of a business starts long before you are ready to put up a for-sale sign. All potential buyers are going to want to see taxes, financials and any existing contracts pertaining to your business. Take the time to get all of these things organised, and you will help ensure a smoother process from start to finish. Get all of your financial and tax records in order for the past three years, including a cash flow report.

West Australian Business Brokers will go through a process of business optimisation, producing a cohesive and documented business strategy, clear and healthy financials, detailed information on your people and plant. We have over thirty years’ experience to facilitate a smooth and problem free transaction.