Selling a business can be a challenging process that many owners will do at some point in their business life. However, selling your business is the final hurdle to getting a large sum payout for all the hard work you’ve put in over the years.
So whether you’re retiring or looking to move on to new endeavours, it’s crucial to execute it correctly. This blog outlines ten steps to selling your business that will help you maximise your sale price, reduce stress and do it as efficiently as possible.
Don’t make a hasty decision to sell. Instead, plan at least a year in advance. As in all aspects of life, planning and preparation is critical. Planning ahead gives you time to talk to your broker, your accountant and perhaps even your managers, who may be interested in a buyout.
This time will ensure you organise your books, produce your financial statements, and make any required adjustments to the company that will raise its value.
Engage a suitable broker.
It’s essential to engage the right broker for you. Brokers come from all different backgrounds. Some have been accountants, and others have been business owners like you.
Some are specialists in industries others are highly proficient with systems and processors. Be wary of brokers participating in a race to the bottom on fees. You always get what you pay for.
Establish a fair price.
Overvaluing your business is among business owners’ top errors when preparing for a sale. Take advice from your broker as to its market value.
If your broker can’t demonstrate why it’s worth a particular amount, talk to a different broker. Set a price that accurately represents your company’s worth on the market, and be realistic.
Prepare Documents and IP.
You must ensure your paperwork is in order before selling your business.
This includes your financial records, up-to-date stock records, tax returns, contracts, supply or dealer agreements and settling any outstanding legal concerns, DA approvals and the issuance of patents.
The procedure will be easier and more effective if everything is prepared, current and clean.
Continue operating the business.
Let your broker do the work so you can stay focused on running your company.
Selling can take anywhere between 6 – 24 months, so you don’t want to miss opportunities just because you’re selling.
Maintain your attention on improving the company’s efficiency and profitability. This will enhance its appeal to potential purchasers and aid in negotiating a better price.
It’s most instances, it’s essential to act with confidentiality regarding the sale of your business.
However, keep in mind you can’t sell a secret, so you need to expect that others may find out at some point.
There are plenty of ways your broker can protect your listing from gossip. If you don’t end up selling, it’s far less disruptive if your employees, clients and rival businesses never knew.
Expect Due Diligence.
Once you’ve signed a contract, there is a good chance your buyer has a due diligence (DD) clause.
Even if you think the buyer has seen all there is to see, at the very least, due diligence can act as a get-out-of-contract clause.
However, 99% of the time, a DD period is reasonable to expect, and you will most likely have to engage your accountant to assist the buyer’s accountant.
Your broker should have all your documentation arranged and available to prepare you for this process.
Consider Vendor Financing
Vendor financing is an additional strategy for attracting buyers. Vendor finance implies that you become the lender of part of the sale price.
Both sides may benefit from this because it might lower the transaction cost for the buyer and increase the amount you receive plus, you can expect to receive additional interest at commercial rates.
Engage the right solicitor.
You need a solicitor focusing on business sales, not just residential conveyancing. They also need an appreciation of commercial and succession outcomes.
This is where most deals fall over; the buyer wants to buy, and the seller wants to sell, but the solicitors have drafted extremely onerous clauses that offend the other party so much they believe they are being taken advantage of, and the deal collapses.
In the end, it’s crucial to maintain flexibility throughout the sales process.
Be open to negotiating the purchase’s price, terms, and other details. Remember that the objective is to sell your business and enter the next stage of your life.
Although selling your business can be complicated, you can minimise the stress by using the advice in this article. Engage the right broker, set a reasonable asking price, maintain business operations, keep the transaction discreet, be open to vendor financing, prepare for due diligence, engage the right solicitor, and be flexible.