So, you’ve decided to sell your business. A potential investor will want to know why, as it’s quite a complicated process and so you must be completely sure.
Usually people sell up because they’re retiring, they’ve lost a partner, they’re over-worked or they’re fed up. It could be, that it’s simply not making the money it once was.
Neil Debenham, who operates a Global Business Advisory with a focus on Mergers and Acquisitions, says whatever your real reason for selling, you’ll have to show it will still be worth carrying on for someone else! “Show your new investors your record of increasing profits, consistent income and a strong customer base,” he added.
Prepare the sale
The earlier you prepare the better – and one or two years ahead is preferential as this gives you plenty of time to get all your records up-to-date. Anyone buying your business will want to see your financial records are organised and can clearly show a profit has been consistently made.
Neil Debenham, says that selling up will take up much more of your time than you might expect. “Depending on the size of your company, you may need an accountant or solicitor to help determine profits and how they will be split, along with things like how it will be operated.”
Clearing up any problems also means it’s an easy transition for the buyer when they do get their hands on your business as they will be able to settle in quickly.
Value your business
Don’t under or over price your business. Now that’s more easily said than done. But a good idea is to get an independent business valuation to appraise the value. You can then use it as a credible document and a good gauge of your price.
Create a sales advert
See if you can prepare a market ad complete with information about your business and use this to circulate to buyers and advertisers. You might like to include information about:
- What the business does and where it is
- Your customer base
- Reason for your sale
- Potential for future growth
- Financial information including the turnover
- Website, social media and contact details
Sell in confidence
Confidentiality may be very important if you are not ready for certain stakeholders, staff or suppliers to find out just yet. After all you will need people in jobs for the preparation sale time.
Neil Debenham suggests that if you do need to keep things under wraps for the time being you can get your potential buyer to sign a Non-Disclosure Agreement (NDA) before you release any detailed information.
Respond to requests
Make it a priority to respond to buyer enquiries as they get lots of opportunities to choose from. With your reply you could email across the advert you created and an NDA if it’s necessary.
Be sure to ask them things you think would affect your ongoing business, for example, if they would keep existing staff on and any other motivations they may have. You’ll particularly want to know how they are going to fund their purchase!
Negotiate and close
Being inflexible on price and terms, often affected by the pre-sale valuation can be detrimental to a potential sale. While you’ll want to ensure you get the sale at a good price you need to be fully prepared for what you will and won’t accept.
Ask yourself what you consider a fair deal. If you have researched the market efficiently, you’ll know how its values affect your business. If you have several buyers interested, this is easier as there are more options. If there’s just one it may be tricky. Find yourself inundated and you’ll need a plan.
Most importantly, you need to set a timeframe. Are you under pressure to buy another business and need the equity from your original one or are you just looking to retire and settle for as much as you can get?