How to Prepare Your Business for Sale

When Preparing your business for sale

Take a Buyer’s point of view

Most business owners never receive full value when selling their business because by the time they come to put their business on the market, either it is too late to do anything with it or the owner has no energy to properly prepare the business for sale. You need to adopt a strategy well before you need to sell and you need to find tune and maintain that strategy. That is the key to business development.

We advise our vendors to take a good look at their business from a buyer’s point of view. Act as though you are doing due diligence prior to purchase. This applies whether you own a micro-business that operates from home or one that has sales worth of millions of dollars per year. Once you adopt the strategic planning mindset you won’t believe the difference it will make to your business; you won’t believe how simple it is to grow and develop your business. What is your growth strategy?

There are a number of areas you can look at in preparing your business for sale. Each point relates to one of three things:

• Boosting Profit
• Boosting Cash Return
• Reducing Risk associated with your business

Our 20 tips on how to prepare your business for sale for the best price

1. Ask Yourself “Would I buy this business?”
Take a good look at the strengths and weaknesses of your business.
Boost the strengths and fix the weaknesses.

2. History of Ownership – 5 years or more would be acceptable.
If your business does not have a long track record, be prepared to prove profit or sales in some other way by trial or by way of performance clauses to be satisfied prior to full and final settlement.
Without track record on your side be prepared to wait a period before full purchase price is paid. In our current economic climate, whilst history is no sure indicator of future performance, it is easier to predict the future if you have a longer past to go on.

3. Image, Brand & Reputation add Value
Nurture your reputation by the quality of the products and services you deliver.
Always be conscious of the image you project.
A good brand says to the market “Trust me and I will look after you”
You have a personal brand as well as a corporate brand.

4. Client & supplier contracts are in place and in writing where possible.
It might be OK for you to believe your contracts, though oral, are safe, however a buyer needs more assurance. Written contracts provide a measure of that assurance.
If you rely on a single supplier, you are at risk unless you are protected by a long contract and even then there are no guarantees.

5. Patents, Trademarks and Copyrights should be protected.
Consult a patent attorney to see that your logo or company style can’t be copied without impunity.

6. Lease must be of sufficient length and contain reasonable terms.
Negotiate your lease before putting the business on the market.
Have lease read by an expert in lease negotiations.

7. Reason for Sale needs to be genuine.
Don’t invent reasons for sale. Such a strategy is transparent and will not help you realise value for the business.

8. Employees – profiles should be prepared and contracts should be secured.
Your staff is one of your great assets. List their duties, strengths, length of employment, salary, incentives etc.
Tell your key employees that the business is going to be sold. Tell them you will endeavour to secure a future for them in the business if they wish.

9. Current owner’s influence should not be too great.
Give more responsibility to key staff.
Reduce the hours you spend in the business.
A business heavily reliant on the current owner loses value for that reason.
Start by outsourcing and move to hiring others to replace you.

10. Credit rating should be healthy.
Pay your debts on time.
A poor credit history can unsettle a buyer.