Selling Your Business
What does life after your business look like? Preparing a business for sale should be approached with the same diligence with which you ran it in the first place. This section presents the top exit strategies for any aspiring serial entrepreneur.
The question of whether or not to sell a business requires careful consideration of a number of factors.
Not only is the condition of the business itself of particular importance but as the seller, your own situation will have an impact.
Whether your motivation is to embrace a new challenge, capitalise on a period of growth, work in a different location or respond to changed life circumstances, it’s vital to have a comprehensive exit strategy.
How to prepare for sale
Making sure your business is fit to sell takes time, and it’s crucial to remain committed until completion.
Initially, your preparations will be mental ones; you need to be firmly convinced that selling is the right option. Would the capital pay for a new project, investment or your retirement? Are there visions remaining that you’d prefer to see through?
Once you are satisfied that you’re ready to part with your company, there are several steps to follow:
- Get a professional valuation from someone with the necessary skills and detachment, such as an accountant or business transfer agent (BTA). This will provide you with a rough guide.
- Assess the physical state of your premises, fixtures and fittings, allowing plenty of time to clean, repair and refurbish where necessary. An appealing first impression can mean the difference between a potential buyer walking away or staying to find out more.
- Most importantly, put your financial records in order, so that they show your business’ performance over a period of at least three years, but preferably as long as five.
The resulting accounts should be honest, accurate and easy to understand.
What documentation do you need to present?
Word of mouth is all very well for creating a buzz around a business, but a buyer will want facts and figures in writing to support any claims about the company’s state of health.
The kinds of papers you will need to make available include: accounts, tax records, proof of physical and intellectual assets and loan or debt agreements.
A full audit can be a worthwhile expense as it could provide the buyer with confidence.
Depending on the type and size of your establishment, licences or permits will need to be in place and up to date.
Any contracts with suppliers and/or clients should continue once you have sold to establish a stable client-base and relationship with suppliers.
Documented work practices and methods can provide guidance for a new owner and help ensure continuity.
Including these in your presentation allows prospective buyers to appreciate how streamlined and organised your business is.
Fine tuning your reputation
A company’s brand image can be one of its most important assets, but like any other asset, it must be maintained.
Using readily available information such as TripAdvisor or your Google Business ratings, can help you to assess your standing.
This is only useful if you act on what you gauge from these sources and address any problems that could damage your reputation.
Creating a positive buzz around your business and its reputation can increase the value of your business significantly and attract the attention of prospective buyers serious about investing in a successful business.
How self-sufficient is your business?
For the good of your company, your business should be able to function without you at the helm.
This can be achieved by various means:
- Thorough staff training
- Clarity of practices and procedures
- Efficient delegation
- Proper use of technological solutions
One way to test this is to take a holiday and remove yourself from the day-to-day running of operations for a considerable period of time; allowing any broken links in the chain to be identified and repaired before attempting a sale.
As with any undertaking, good preparation is the foundation of a successful transaction; both you and your workforce will reap the rewards of your efforts when you secure the right buyer to take the business forward.
Getting your tax affairs in order is never more important than in the lead-up to selling your business, says Peter Ball, tax partner at Smith & Williamson.
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