Posted Under: Blog Posted On 11/09/2015
6 Tips To Get More Money When You Sell Your Business
Are you thinking of selling your business sometime in the next 5 years? Then you need to make sure your business is in good shape to not only look attractive to buyers, but to also get maximum $$$ in your pocket.
- Consider Strategic Buyers – There are two kinds of buyers.
- There are Financial Buyers who are buying your future profit streams. Typically anyone who is interested in your industry and wants to make money from it.
- Then there are Strategic Buyers who are buying your business to improve the performance of their current business. Strategic buyers could offer you a higher value for your company because it will increase their current turnover, extend their current product line, or take them into new geographical areas or distribution channels already created by you.
- Keep Good Financial Records – When looking at a potential business to purchase, buyers and their accountants are looking to verify –
- Three years of accurate financial records. Ensure your bookkeeping and accounting is done regularly and is up to date.
- Your business to have a stable financial history – good, regular cash flows
- A sustainable future and potential for growth
- Sell A Business That Can Succeed Without You – Oftentimes, the owner and the business are one and the same. Having your business heavily dependent on you will mean the business is a risky proposition to the buyer. How will the buyer know the business can succeed without you? Document everything. Put it in a tangible manual that they can hold and see. Of course, have a saved soft copy as well. Good systems show buyers that you have the business under control and that it’s not dependent on you for survival. A tip is to prepare your business as if you intend to franchise it. What do you need to document?
- Business Plan/document that overviews your business, it’s direction, goals, target market, marketing strategy, what your KPI (Key Performance Indicators) are, key business trends and future potential of the business
- Manufacturing and Supplier contacts and process
- Current distributors and distribution process
- Sales processes
- Administration processes
- Computer program processes and instructions including CRM
- Training procedures
- Reduce The Buyer’s Risk – Consider how to make the business less risky from the buyer’s point of view. Remember that a buyer may have the alternative of setting up a new business from scratch, so your goal is to make life easy for them.
- Turn informal agreements with suppliers and customers into formal contracts
- Establish that your suppliers won’t cut any established lines of credit when you sell the business
- If you have key employees, implement incentive schemes to encourage them to remain with the business
- Consider widening your revenue and supply sources to reduce your dependence on a few large customers or a single supplier
- If your tenancy agreement is due to expire soon, make sure the landlord will agree to a new one in writing
- Consider Restructuring The Business – Is your business currently structured in the best possible way for a sale? For example, if your business owns its premises, could this make the business as a whole too expensive for a potential buyer? If so, consider restructuring into two independent businesses – one business could own the building and the other business could own the trading part. You might then decide to sell the trading part and keep the business that owns the building and receive rental income. Similarly, if your business owns expensive plant and equipment, you might follow a similar tactic and split into two businesses – one business would own the plant and equipment that would be leased to the trading business.
- Optimise How Your Business Presents to the World – By looking at your business with a ‘fresh eye’ and seeing what the potential buyer will see, you give your business the best opportunity of selling and also maximizing your sale price. Does your business look attractive to a buyer? Is it fresh? Clean? Organised? Professional? Examine your –
- Shopfront – Is the signage visible and fresh?
- Office – Is the signage visible and fresh? Is it clean? Is it organized? Does it look like somewhere you would want to work? Is technology current? Are instruction/operation manuals prominently displayed and easily accessed?
- Warehouse – Is the signage visible and fresh? Is it clean? Is it organized?
- Website – Is it mobile friendly? Is it easy to navigate? Who is the website targeted to – distributors or customers and does the site reflect this? Is the website up to date i.e. contact details, product lines, blog entries?
- Social Media – Is it used effectively? Do the posts represent a professional image, an expert opinion?
- Business Vehicles – Do they have signage? Are they clean and do they represent the business well?
- Branding/Logo – Is the brand/logo consistent? E.g. Signage (on business and at point of sale), website, Facebook, twitter, stationary, sponsorships. Be particular about size, colours, and fonts.
The sooner you get your business in shape to sell, the better it will look from a purchaser’s point of view, hopefully meaning a quicker sale and/or more optimum price. And in the meantime, the upshot could be a better streamlined, better presented and more profitable business. And who wouldn’t want that? Maybe you won’t want to sell after all………