How to get your business ready for sale

ONE of the biggest rewards that comes from building a small business can be selling it to a willing buyer, hopefully for a handsome profit.

small business

ONE of the biggest rewards that comes from building a small business can be selling it to a willing buyer, hopefully for a handsome profit.

There are plenty of things to do to help ensure you get the biggest profit from any sale, or get any sale at all.

"The reality is that some businesses don't put their best foot forward when selling," says Dale Wood Business Sales Consultancy director Bevan Roberts (pictured).

He says business owners should first ask themselves one question and be honest about the answer: "Would you buy your own business?"

"If not, you may be wasting time, money and energy. Instead, talk to professionals about the possibility of selling parts of the business that may have a stand-alone value."

Roberts says a realistic price is essential because the current market does not reward overly-ambitious prices.

He says it is vital to make your business sale ready.

"Take your involvement as owner out completely and reach a situation where the keys could be handed to a new owner, the door opened and everything would work according to the documentation, systems and perfect training of the personnel," he says.

This could take months or years to complete but should boost the price and speed a sale.

BDO partner, private clients, David Fechner also recommends having some sort of ownership manual or handbook that outlines all facets of the business including supplier details, intellectual property and a list of staff.

"Be able to explain to a potential purchaser what your customer base looks like, how you interact with customers, do you have contracts, how 'sticky' or reliable are the customers," he says.

"If you can improve the certainty of your profits a buyer should be prepared to pay more for the business."

Fechner says before starting the sale process, business owners should understand how much money they are likely to walk away with after paying things such as tax, staff entitlements and bank debt.

"For a good business, a purchaser should be paying for the profit that the business generates rather than the assets, because the profit should be worth more," he says.

You need to be able to demonstrate your business's financial performance, which means good financial reporting is a vital aspect.

Roberts says buyers will look to the last three years' financial accounts to assess the worth of the business.

"They will be entitled to bring in their own advisers to assess how well the numbers stack up - and how reliable the price tag is," he says.

"It's not unusual for the price to change once the books have been opened."

It may go up if records are showing the company is growing quicker than expected, or down if it appears there are weaknesses ahead.

"Knowing that your accounts are beyond reproach lessens the possibility of shocks for potential buyers, meaning you are one step closer to a sale," he says

"While not every business will bring in a life-changing sale, these are some of the basic things that should be done."

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QUESTIONS THAT BUYERS WILL ASK

- What is the financial performance of the business?

- Does the business have a good reputation?

- What makes it different from its competitors, and does this mean it can grow?

- Who are the customers?

- Is the business dependent on suppliers and are there contracts in place?

- What work is in the pipeline, and how good is the business at converting proposals to jobs?

Source: BDO