When you are thinking of selling your business, have a reality check before you do anything else.
The process of determining the worth of a business can quite often leave the owners of the business anxious. If they purchased the business and paid a substantial amount in “Goodwill” they may be in for a nasty surprise. All markets have troughs and peaks, and like the housing market in Australia, the business market has suffered.
There are many and varied contributing factors to the decline in the price of businesses. Retail has been hit by the internet, restaurants have been heavily impacted by “Uber Eats” and other similar enterprises. Newsagencies and Lotto Kiosks have had to contend with online purchases. All these factors make the purchase of a business much more of a riskier proposition that it was five or ten years ago. Accordingly, the demand for businesses has fallen. There are still genuine buyers in the marketplace, however they have a multitude of businesses to choose from.
If you purchased a business five years ago, and the profitability of the business hasn’t improved significantly, there is very little chance of you recouping your money (in the present market). Losses in the region of 40% are not uncommon. Undoubtedly, some people paid too much for their business, but others paid the correct price.
If you wish to sell your business in the current climate, the crucial aspects pertaining to business sales are even more important:
- Make sure there are no skeletons in the closet. Buyers will dismiss any business they find issues with.
- Be upfront and honest. A genuine buyer conducting proper due diligence will uncover any inconsistencies.
- Make sure staff wages and entitlements are correct and up to date.
- It is imperative that the business is priced correctly. It’s a good idea to get your business valued.
- Make sure the financials are up to date. No one will purchase a business on financials that are 12 months old.
- You may have to come to terms with the fact that you will not receive the amount that you believed your business is worth. The question to ask yourself is ”Will the market return to what it was?”