No matter how much you love your business, there might be a day when you want to either pass this to your successor or put it on sale.
Everyday grinding might place the owner to be complacent at what the buyer needs or looks for in a business. Owners might not actually look into preparing business for sale until they have engaged with buyers, most of the time this will make the owner leaving large amount of money on the table.
If running day-to-day business is one thing then preparing it for sale is whole new art. There are many strategies you could use to sell your business like you could use Family succession, Management buy out, franchise or you could find a potential internal manager to buy it from you. No matter what strategy you use, to get the best out of this deal you need to prepare your business for sale.
Executive Management Team
Significant amount of time is required to build a team, in the initial stages of establishing company, you might go across teams, that are difficult to manage, non-collaborative and non-accountable to business. Over a period of trial and error, you have built a management team that’s effective at doing what they do. You have invested significant amount of time and effort in building this profitable team, buyers prefer to have a business that runs on its, demanding minimum time from the owner.
As a business owner sometimes we take things for granted, for instance most new businesses need to go through series of losses before you could see some profit on the table. Your business has proven itself through this phase of establishing, generating customers and revenue. This is nothing but a strong signal to the buyer that the business is viable and proven itself over time, an indication to you that it should fetch you more than a new established business.
In any successful negotiation the seller needs to think from both sides of the deal. Shift your perception from seller to buyer- if you were a buyer looking to acquire a business in this niche, what traits you would look for and reasons why you want to buy this business.
Now that you have the list from sides how many of the requirements from buyer does your business satisfy? The more ticks you can have the better are your chances of selling the business at a profitable price.
If you don’t have all the needs of a buyer matched, what can you do to satisfy these needs without much financial investment?
For any business location is key for generating potential sales, how is your business located geographically. Are you located in an area where there is low crime, high visibility, good per-household income?
How about lease, do you have special discount with the owner?
Note down all the positive traits your business have over your competition.
Sometime having a new infrastructure gives required boost your business needs, check with your council if there any major projects coming around your area. A potential local development, not only increases local population but also increases perceived value of the business.
List out all the customers you have, the bigger the better, highlighting all the diamond customers that your business serves. When disclosing your customer list be careful in disclosing more than required at earlier stages of the deal.
All businesses have potential opportunities to expand the business, and not all can be explored by anyone. If you list out the potential opportunities that can be explored to increase revenue, that will give you an edge over your competitors.
Buyers are also investing money on the potential that the business have, present income + potential future income determines the price investor is willing to pay.
Taxes, Depreciation and Amortization.
Your earnings and tax history is a source of building confidence for buyer, it is a legitimate certification of all the claims that you highlight above. This is not something that you can achieve in a month, this is a result of best accounting practises followed over years, ask your tax agent to add detail supplement at each section as you file out tax returns/depreciation.
Timing is everything
The effectiveness of timing should not be underestimated, every business has cycles, up season and a down season. You need to gauge the potential loss of revenue selling it before up season compared to down season …. And vice versa.
There are many traits and tips you can do to bring your business into lime light. If preparing your business for sale is one side of the coin there is the other side of you preparing mentally for the deal. If possible hire a negotiator to complete the deal, or sharpen your skills in closing off the deal.