Article: Commercial
Preparing the Sale of your Business
The preparation of selling your business is probably the most important activity a business owner will undertake prior to going to the market. As with selling a property where the owner needs to shape the driveway, maintain the garden, clean the house, and paint the fence.
Preparing your business for sale requires very similar actions to be undertaken seriously in order to enter it successfully into the portfolio of your business broker.
In this stage of the sequel of articles we relate exactly to this stage and have kept it concise and easy to follow.
Get the Financial/Records straight
Financial accounts mean ‘Profit & Loss Accounts’ and this is what will be required – it needs not to be a full balance sheet.
NORMALISATION: This can be done by the business broker to save on accounts fees which many small business owners want to keep to a minimum.
CONTRACTS: If the business has supply or service contracts then the seller should have copies of these available for the business broker.
STAFF: A complete list of staff outlining their experience and qualifications, as well as an indication as to each individual staff members responsibilities is required.
LEASE OR OCCUPANCY: A copy of any documentation such as a lease should be made available.
ASSET OWNERSHIP: A list of plant fixtures, fittings, vehicles etc. being sold as part of the business should be compiled separately into a depreciation schedule. These schedules are often known to be notoriously out of date. As this list will form part of the sales contract it is of crucial importance to be accurate.
Of equal importance is compiling a list of items that are not being sold as part of the business although they are currently visible on the premises. Items such as a light fittings or pictures that may have been gifted to the seller and do not transfer with the business.
Eliminate the Perks
Identify any perks such as overseas travel that may appear in the accounts.
The owner’s role within the business
Are you critical to the business? Many businesses such as a trades industry may rely on the skill of the owner to survive. Transferring these skills to a new owner may take some time and effort. Ask your business broker what you need to prepare for after the sale to assist the new owner to acquire the necessary skills to operate the business.
Invest in the business sale
The buyer can not consider purchasing the business if he/she does not know it is for sale. It is recommended therefore that sellers invest in a planned marketing program that exposes the business to the maximum number of potential buyers. Your business broker will be able to assist with planning and a budget that will achieve the best promotion.
Will you as current owner offer finance?
This has become more important as bank lending criteria has tightened up over recent times. In New Zealand it is normal practice for a seller to receive the full amount of the purchase price on the possession day. However overseas and especially in the USA and Europe up to 90% of business sales rely on the seller providing some form of finance.
The timing of selling your business is as important as the preparation and needless to say that aiming towards going to market when the company is running at peak efficiency with a solid record of profits would be a great benefit to maximizing return on investment.
