Business Preparation

Preparing Yourself and Your Business

Selling a business is one of the most crucial financial decisions most business owners will ever make. Unless you have been through the process before it can be difficult to know what to expect, and the emotions involved in selling a business you may have spent years building, can make things even harder.

As you prepare to sell your business it is important to prepare yourself as well. When it comes time to negotiate with potential buyers you should have a solid idea of what would appeal to you if you were the buyer. What makes your business different, and why? Know your businesses strong points and not-so-strong points.

When to sell?

• Timing is everything. The price you get for your business can be greatly improved by choosing the right time to sell. If sales are increasing, profits are on the up, and the business is performing well in a growing market, all signs point to a good sell.
  
  
• Readying a business for sale can be complicated and may carry added financial stress if you are worried about recouping large investments. It has been said that the best time to start preparing to sell a business is during its conception, however, if that moment has passed, allow yourself 6 to 12 months for the various stages of preparation. These include:
  

Valuing your business

• The best way to get the maximum sale price and ensure the buyer feels satisfied with their purchase is to attain an accurate valuation of your business. It will pay to seek professional assistance. An accountant, solicitor or corporate adviser will be able to give you an appropriate method for valuation and ensure the valuation is realistic. They can also help with identifying and marketing your business sale to potential buyers.

• Know as much as possible about the dynamic (e.g. day-to-day operation, contracts, stock control methods) of your business. When you meet a potential buyer being able to convey this information clearly will increase your chances for a sale.

General preparation / Increasing the value of your business

• Like dressing a house before its sale, making your business more attractive can do a lot for a buyer’s perception of its value. Try to streamline your business. This includes getting rid of excess stock, having any debtors under control and making sure the general appearance of the premises and staff are up to scratch.

• Having your accounts and the suppliers books in order will show you have made an effort to make the new owner’s transition an easy one:
  
  
• Prepare audited accounts and forecasts for the prospective buyer.
  
  
• Ready financial statements and projections demonstrating the growth and revenue potential of your business. Cash-flow projections are important for small business buyers.
  
  
• Rectify any equipment leases, return unnecessary equipment. Supplier contracts, staff contracts, etc. should be in order.
  
  
• Itemise company assets, moveable and immovable.
  
  
• Close pending customer accounts.
  
  
• Tie up all similar loose ends.
  
  

Make yourself redundant!

• A new owner needs to be assured that the success of the new purchase doesn’t rest solely on the previous owner’s connections and expertise. Are you reliant on a key supplier, staff member or customer? Consider what the impact would be if someone else was running your business. If the business is a house of cards dependent on your presence to stay upright, there may not be much to sell.

Comprehensive documentation and systemisation will reduce the reliance on any one employee or operator.

Create an operation manual to document precisely how best to run your business:

• Detail unwritten rules and effective techniques the business may rely on.
  
  
• Describe daily activities, information on any local competition, relevant industry information, and the business’ history. This document is also known as an Information Memorandum; it is the most important documentation in the sale of a business. Buyers can and will use this document to gauge their interest in the business.

• Consider the tangibility of your business. Is it possible to demonstrate the worth of the business to the buyer clearly and concisely? The value of solid, well-developed relationships with customers can be difficult to convey to buyers. Contracts and trusted sales staff give the business a concrete sense.

• Keep staff in the loop. Inform them of your plans and let them know that you will do your best to secure continued employment under the new owners, if they wish. A contented staff gives a good impression to a buyer.

Seeking tax advice

• Getting tax advice early will point out issues which may impact the deal down the line, this is crucial to minimising the tax burden.
  

• Seek advice on tax structures from a professional. Conditions may need to be in place for some time before becoming beneficial.

Preparing To Put A Business On The Market

• Planning. A business has no value other than what the buyer can create from it. There’s no point selling a hair salon to a mechanic. Who is best served to make money from your business? Cater to them. Discipline is essential. Find ways to reach the buyers who will be interested in your business. Be thorough in deciding who potential candidates may be, and equally thorough in describing the business in terms those candidates will appreciate.

• Use the internet. Listing with online sale of business sites and keeping your own business website gives a huge increase in market saturation and greatly improves the chance of a quick, satisfactory sale. That’s where we can help!

Once you are happy that you have prepared your business as best as you can it is now ready to put on the market. The next stage is to get your business in front of as many prospective buyers as possible.

So What Do You Do Now?

For detailed information and tips please read the next article in the series. Business, Where & How to Advertise