Selling a Business? Make it Buyer Friendly

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. When it comes to selling however, 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.

It may be that you have had the caravan parked in the driveway for three years and just can’t find the time to take off, or a voucher for a glamorous hotel stay hiding in a drawer. Some of us may be looking for a change of profession or have our eye on a bigger and better opportunity. In any case, the business must be sold.

All these conversations have one question in common. How do you sell your business, and what do you have to do to get full price?

Selling Options

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 you’re 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 paperwork 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 into your industry, qualify genuine buyers, produce contracts, manage the solicitors and accountants for the landlord, buyer, sellers and sell.

Up front information

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’s give an example. If you were at an open inspection for a new home, and the owner showed you the front yard, backyard and living room, but the rest of the house could only be seen next week. Not exactly giving you confidence, is it? Business is exactly the same.

Buyers don’t just want to see the front of the shop, office, website or warehouse.

To make a decision to buy, they will need operational detail that includes:

–   Sales

–   Cost of goods

–   Profit and loss statements

–   Rosters

–   Weekly wages

–   Rent

–   BAS statements

The list goes on. 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 marketplace. They are looking for businesses to buy, and to some degree will pay top dollar if they find it easy to purchase. If it’s too hard and they have to wait too long to provide their solicitor and accountant full details, they will walk away.

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 may ask why you are selling. If you answer “I have been working 100 hours per week, my lease is about to end, and I can’t make any money” then 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 business’ 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 to provide a complete list of unencumbered plants 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’s 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.

Get in touch with us for more information about making your business buyer friendly. With our experience, knowledge and insight these steps will be as easy as A, B, C!

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