Selling your business – wouldn’t you want to try the best way rather than any old way?
As a business owner you’ve probably spent 10-20 years of your life building up a company with a good customer base, loyal staff and, most importantly, one that makes a profit. You’ve probably experienced a lot of stress and pain on the way as you struggled with cashflow issues, finding new customers, keeping customers and simply dealing with a myriad of daily tasks that keep your business going.
After 10-20 years you, and probably your life partner, are ready to slow down and reap the rewards of your investment. Therefore, selling your business for a handsome cash sum seems like the easy part of the journey. In some instances, it is, but in many cases business owners end up selling their hard-won assets for much less than they could get if they planned it correctly. Here are a few tips on how to ensure you get the best price for your business sale and ensure the transaction goes smoothly for everyone involved.
- Preparation is 90% of success. When a company is acquiring, they will examine your business closely to ensure it is in good shape and represents good value for money. It is a good idea to create a file to keep everything to hand including: 3-5 years audited accounts; recent management accounts; customer contracts; staff and management contracts; business plans for the future; sales and marketing activity; organisational chart; systems and procedures. This will give the buyer confidence and make the whole process easier to manage and less time consuming.
- What’s your business worth? If you have tangible assets in your business such as plant and machinery this will have an impact on the price, but generally the value is based on a multiple of the net profit. It could be worth doing some research on companies that have sold previously in your sector to see what multiples are being paid. It also comes down to negotiation and this is something you can do yourself but you may find you are too close to the business to look at it rationally so you might be better off using a specialist to handle the pricing and negotiation.
- How to market your business for sale. There are a number of ways you can attract potential buyers for your business. There are many business sales agents or listing services who advertise on the web and they handle large volumes of businesses. They will generally charge you a monthly retainer fee, which can last for 12 months or more, plus they will charge a percentage of the final sale price achieved. The challenge here is that they tend not to advise on the price and are simply acting as a marketplace which is not very targeted and hence the quality of the buyer may not be ideal. Again, it may be worth using an expert who will have access to a database of UK and overseas buyers who are regularly looking for businesses to acquire. They will also advise on the sale memorandum and be involved in the whole process from initial contact through to the eventual sale.
- Communication is key. While you’re planning the sale of your business you will naturally want to keep this news under wraps to avoid alerting your competitors and unsettling your customers. Also, you don’t want your management and staff to become concerned during a period of uncertainty. Therefore, managing the sales process is important until you are in a position to make the announcement. This can happen quite quickly so having a communications plan prepared in advance is very important. Everything should look and feel controlled and positive to ensure customers, staff and suppliers support the new owners of your business.
- Legal protection. It goes without saying that you will need a good commercial lawyer who can handle the contract requirements. The acquirer will probably have their own legal team so you just need to make sure you have a strong partner on your side who will ensure that everything goes smoothly, you are protected as an individual, and your payment is received as promised.
Paul Vousden is a business sale expert and he can be contacted on: firstname.lastname@example.org or by calling: 07973 428139