Selling your business can sometimes be problematic. Business owners may have an unrealistic expectation of the time (and effort) needed to conclude a satisfactory business sale. There are a number of things that an owner can do to improve the process and ensure they receive the best price for their business. Amongst these are:
It is naive to expect a buyer of a business to formulate an offer for a business sale unless they have a complete set of up to date financials. This is the foremost, crucial aspect of selling a business. You may receive an offer without financials, however it is extremely doubtful it will be as high a price as an offer based on complete up to date financials. Human nature usually dictates that unless there are current financials, there must be a very good reason why they aren't available. Buyers will think that there is something very wrong with the business and usually walk away.
Lack of Preparation.
It is not only the financials that need to be prepared. There are a host of issues that need to be considered. Any staff issues will need to be addressed. It is important to make sure that any payment of pro-rata long service leave is transferred to the new owner and the current business owner pays out the employee's untaken accumulated annual leave.
Stock can sometimes be an issue when it comes to a business sale. It is prudent to ensure that there is no out of date or unsaleable stock when it comes time to complete a stock take.
Unlike residential real estate, where there are numerous data bases for retrieving sale prices, business sales are invariably closely held information. There is no data base that offers reliable information as to what price a business sold for. Sometimes a business seller will arrive at a price because "I feel it is worth this much." If you seriously want to sell your business and get the best price, it is vital to get a business valuation from an experienced valuer who has the qualification to perform such a valuation. In my experience, businesses that are overpriced to start with, usually sell for less than the market price in the end. The longer a business is on the market, the less chance you have of achieving a high price.
Not using a Business Broker.
There are a great number of reasons why it is advantageous to use a business broker.
- A good business broker knows that, first, maintaining confidentiality is key. You will need to navigate the transaction process carefully and quietly – only disclosing the sale to others when necessary. A broker can market the business for sale without divulging the name until a qualified buyer is located. A broker can also advise about the proper time to deal with landlords, employees, suppliers and customers.
- A good business broker has a long history of successful transactions and access to more information than you do. This allows them to negotiate a higher sell price than you could do on your own – and more than cover their commissions.
- Although you will provide the information, a good business broker knows how to put your business in its best light through a professionally prepared offering memorandum. A good business broker also knows what financial information (and in what format) a buyer will need to see before making an offer.
- Management. A broker will manage the deal from contract to closing, including all important steps along the way. Without this effort, buyers tend to languish and time kills all deals.
- Qualify buyers. A broker will screen all prospective buyers by collecting a non-disclosure agreement, a resume and a financial statement. Buyers who are not capable, either by their finances or their background, should not receive confidential information about your business.
- A broker knows it is important that the buyer and seller maintain a good working relationship since the seller will likely help transition the business after the sale. A good business broker can act as a buffer during stressful moments in the sale.
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