Building a business can take years. It can be a lifetime’s work. You might make mistakes but they can be fixed along the way. But when it comes to selling, you only get one chance - that’s it!
There comes a time when an owner of retail, wholesale or service provider business wants to sell.
Many people find themselves having that discussion with the misses around the dinner table. Of course there are many reasons. It may be that you have had the Land Cruiser and caravan parked in the driveway for three years and just don’t find time to take off. Some of us maybe looking for a change of profession or have our eye on a bigger or better opportunity. In any case, the business must be sold.
All these conversations have one question in common. How do I do it?
Business owners will discuss every reason why they should sell. This conversation is often followed by: ‘did you hear what Dave sold for? I can’t believe it, ours would be worth more than that!’.
So how do you sell your business and what do you have to do to get full price. Once it’s sold that’s it, you can’t ‘go back and sell it again latter for more money.
There are many options available to the business owner when it comes to selling a business.
An owner can:
1. Advertise or introduce buyers to the business and have their accountant and solicitor draw up the contracts of sale and sell, which is very difficult when your trying to run your business.
2. List the business for sale with a real estate agent and have them advertise the business for sale and introduce interested buyers. There are very few real estate agents that have the skill to manage a business sale transaction if they find a buyer.
3. Engage a business broker to prepare the necessary paper work often found in a business profile, that the buyer can appraise, advertise the business for sale and introduce interested buyers advise the owners solicitor and sell.
4. Engage a specialist business broker that has sold businesses just like yours to produce a business profile, advertise, market to known industry buyers, investors looking to buy in to your industry, qualify genuine buyers, produce contracts, manage the solicitors and accountants for the landlord, buyer, sellers and sell.
Up front information
I bet your next question is. What should I do?
The answer is simple. Make it easy for the buyer. Present your business to the market in the best possible way you can. Provide all the necessary information for the buyer to make a decision up-front.
Most buyers have a short attention span when it comes to buying a business. If they don’t have enough information to make a decision to buy within ten days of introduction, they tend to walk away.
Let me give you example, if we were to compare buying a house to a business.
You and the better half go to look at a four bedroom house. You have been looking for a while and are keen to buy. You meet the owner and he shows you front and back yard and then the living room. You ask if you can look at the bedrooms and he says they are a good size and have ample storage and if you come back his wife will show you through next week. You get in the car talking about what an idiot he is. How can he expect to sell without showing you the bedrooms and the rest of the house?
It’s the same when you sell your business.
Buyers don’t just want to see the front of the shop, office, web-site or warehouse.
To make a decision to buy they will need operational detail that includes sales, cost of goods, profit and loss statements the staff roster, weekly wages, current rent, BAS statements, payroll summary, a copy of the lease, the licences, the dealership agreements, the franchise agreement, trademarks, supply agreements and a list of plant and equipment that goes with the business.
The good news is that experienced business brokers know how to do this, and will work with you to produce what is needed to best present your business.
If you are worried about confidentiality have the buyer sign a confidentiality agreement. Buyers know that when you sign this document you are bound by law to only use this information only for investigating a purchase. These forms are readily available from brokers and solicitors.
The truth is that there are too many buyers in the market place. They are looking for businesses to buy and to some degree will pay top dollar if they find it easy to purchase. If its too hard and they have to wait to long to provide their solicitor and accountant full details they will walk away.
Businesses with good cash flows are in demand and there are many buyers in the market place. Making the purchase “easy” is an important step towards getting the buyer to pay top dollar.
Golden Rules for Sellers
1. Don’t ask too much.
Buyers will look at many businesses. To make a sale, your business has to be good value for money. Return on investment - of money and the time needed to run the business - is everything.
2. Have a Good reason for selling.
After buyers ask what the price is they ask why are you selling. If you answer I have been working 100 hours per week my lease is about to end and I cant make any money, you should be looking at selling the equipment not the business.
3. You need to provide proof of income.
Full tax figures should be readily available with BAS statements to match. In the unlikely event that you’re in love with the ATO you should be prepared to discuss how the business runs so your broker can explain the best way to handle difficult questions from a buyer.
4. You should be willing to train.
Most buyers will need some assistance in the first few weeks of their ownership. Keep in mind that the higher prices paid for businesses come from buyers new to your type of business. They have to pay for the businesses goodwill as they don’t have the expertise to start one themselves.
5. You will not compete.
Any new owner wants to be sure that you the seller will not be competing for market share with them. You can’t sell the business and then start another in the same area.
6. You need provide a complete list of unencumbered plant and equipment sold with the business.
All buyers want to know what they are purchasing in the way of plant and equipment, and most often the fair market value of the equipment. If there are rental agreements in place for security cameras or leased items they need to know about them.
7. You will need to provide a full copy of the lease or freehold details to buyers.
Keep in mind that secure tenancy is very important to a buyer’s financiers and banks if money is to be borrowed to purchase the business.
8. You will avoid surprises.
Smoke and mirrors will destroy the buyer trust and will send them running not walking to another opportunity.
9. You will ask agents, brokers, and solicitors: how many businesses like mine have you sold?
It’s important when engaging professionals that they have experience in what is needed to complete your sale.
Related Tag: Sell Business Gold Coast