The complete guide on how to sell your business
Ready to sell your business? We Sell Any Company have put together a series of guides that will walk you through the process, whilst pointing out the pitfalls and highlighting the opportunities available to help you get the very best deal in the fastest possible time. If there is something you’d like to know that isn’t covered in this post, then feel free to contact us and a member of our specialised team will be in touch to offer free, no obligation guidance and advice.
Before you take the plunge and put the wheels in motion to sell your business you must first prepare your business for sale and that is what this post is about.
Make sure selling is the right option for you.
There are many reasons why you might look to sell your company and here at We Sell Any Company we’ve heard them all: You might have started the business with the specific goal of selling later on down the line as a tidy retirement option. You may have grown tired of running the business and want to move on to pastures new, or outside social and environmental factors have hindered your business and its ability to thrive under your management.
Whatever your reason for selling your business, you need to make sure it is seen as an attractive proposition to a prospective buyer.
Can your business run without you?
It’s often overlooked but we have seen many company owners with established brands and adequate balance sheets fall at this hurdle.
So many people take on a wide range of roles and responsibilities when they start a new enterprise. The business owners that succeed and stand the test of time generally do so because over time they delegate specific roles and responsibilities to employees or out to contracted help. This allows them to take a global view of their operation without having to do the jobs of several people all at once.
There are those out there – you know who you are – who insist on performing the tasks that really should be the domain of hired help. And, being the altruistic person that you are, the wage you have paid yourself does not even come close to representing the amount you would pay to hire other professionals to do the same tasks. Your outgoings (and profits) therefore will not be an accurate indication of what a prospective buyer can expect – unless of course they are just as skilled as you and plan on replicating your individual work pattern (very unlikely).
If you fit into this category then it may be an idea to keep the business going and demonstrate that you can still turn a profit even without your multiple hands on approach.
In short make it as easy as possible for a prospective buyer to see the business as a successful going concern – even without you at the helm!
Business profits = purchase
Put yourself in the shoes of a buyer. Would you want to buy a business that has a proven track record of generating profit as well as positive indications for future profits years down the line? Or would you prefer a business that is merely scraping by (A rhetorical question (I hope))?
A growth business will ALWAYS command a higher price and attract investors. The trouble is, the last thing on a business owners mind when they are generating healthy profits is to sell. In fact we have seen sellers have to let their business go at alarmingly low prices because they take their foot off the gas the very moment they make their mind up to sell.
No new business comes in, the profits go down and so does their valuation.
A little tax aside here…
Not that you should do this anyway but… I’ve seen business owners marvel at their ingenuity by legally making it look like their business is merely breaking even to ensure their tax bill is as low as it possibly can be. Once it comes time for you to sell up then all that hard work is washed away because your accounts do not represent the true potential of your business. I’d be surprised if the tax saved is anywhere near the money lost that a reduced valuation can give you.
How long will it take to sell my business?
Six to eight months is the average time for a business to be on the market. Though several factors can severely affect the time taken to complete a successful sale (which will be covered in more detail in a later post). Depending upon market conditions it can take years, not months to complete.
I’m going to be completely self serving here and highlight that We Sell Any Company have trained industry professionals with a proven track record and operate a targeted multi channel approach that significantly reduces the time taken for you to sell and to get the best possible price for your business.
Contact us below if you’d like some free advice.
There that was subtle wasn’t it?
Reduce liabilities for your prospective buyer
When a business owner buys your business outright then they also receive all the business assets (great!) and all the business liabilities (not so great).
Imagine buying a second hand car. Ideally you’d like the car to be mechanically sound, to have hardly any miles on the clock and to have a nice long MOT alongside a good service history. Without these in place you would have to factor in the implied costs on top of the asking price.
Now let’s relate this to your business for sale:
You will have at least three to five years trading history and be offering full disclosure to a prospective buyer so they can see for themselves just how much money they are going to make by purchasing your business.
On top of this, ensure that you have signed and up to date contracts with casual workers and members of staff. If there are any employee disputes then make sure that they are settled also.
If you have valuable assets then make sure these are protected too. This could be a trademark protecting intellectual property. It is important to note here also that many buyers will only see this as valuable if the asset being protected actually drives profits. The asset may even fit into your USP which will help clearly define your market and make it easier to attract specific investors. We go into more detail on this in a later post on due diligence.
Do you have third party consent?
I’ve seen this overlooked many times but take into account those (sometimes unforeseen) elements that can significantly impact a business sale price.
Look outside your business and try to highlight and solve potential barriers to sale – your business premises for example:
If you need landlord approval (or approval from suppliers) then factor this in early. There are some unscrupulous people out there who may see an opportunity to make a nice little sum of money simply to give their okay for you to sell your business to another.
Thanks for reading – or listening if you have our audio version.
I could write a lengthy book on this topic but have broken this post into the key points that you might want to consider. If you would like further help or guidance with your business sale then We Sell Any Company are ready and waiting to help. Advice is completely free and tailored to your own circumstance.
Simply click the link below and we’ll be in touch: