Selling a business isn’t as easy as you might think … and can be hard work, although the rewards can be substantial if you’ve built up a great asset. This article is working on the premise that you have taken all the steps to grow your business and prepare it for sale … and now you are ready to actually sell.
Now, just to clarify you are ready to sell your business, are you able to tick off ALL these boxes?
- You have a minimum of 3 years of great financials where the business is making a really good profit. Your bookkeeping is current, accurate and tidy.
- You have a database of all your clients and connections.
- You have documented systems and processes. It’s no longer all in your head.
- Your business can now run without you. You need to think about how things will run once you’ve sold, because, I can assure you, that is exactly how the prospective owner is thinking.
- Is marketing in place, a great website and this runs all well without you?
If you’ve answered yes to the above, and more, then here are your next steps in selling a business:
Stop thinking of your business as your baby, and start thinking of it as an asset.
The sooner you detach yourself mentally the better. You should also now have detached yourself from obvious things, like the website. Before it was fine to have your details, photo etc on the website, and the company bio might have been notably about you. That should be rewritten now and individual photos of you substituted with photos of the team, or the business. You are not in growth mode where I believe it’s fine to trade off the owner’s personal branding.
Do not tell clients or staff.
There will be plenty of time to advise them later and doing so prematurely can kill the business. Clients may well start looking for another supplier, as will staff who feel their job security is uncertain. The price you can get for your business is strongly dependent upon both clients and employees. Once you have a suitable buyer who you know will keep your staff and service your clients well, then you can advise staff first, giving them the assurance you’ve found the right boss for them and that their jobs are safe. Customers don’t need to know until the sale has occurred and once it has, they will see little has changed – hopefully. However, because once it’s sold, things are out of your control, I loathe to guarantee sales/customer levels. If the new owner makes too many changes, annoys customers, gets staff offside, or makes some poor business decisions, then why should that be the seller’s fault financially?
Get a broker.
I’ve worked with a broker before and thought I’d give it a go myself last time around; whilst I had a great understanding of the process, having a broker makes all the difference, both with your success in selling but also the price you get. My perception is that the quality buyers quite simply prefer to use a broker, so as great as your advert might be – it won’t get the results a broker gets. Frankly the cost of the broker can be added to the price, so you won’t be losing money. Good brokers really do pay for themselves.
Be prepared for due diligence.
This can be easy or painful, depending on your buyer and depending on how organised you are and how organised and complete your paperwork is. Most certainly have the last 3 years of figures ready and PDF’s of your BASes handy. Please do NOT give them your Xero or MYOB file complete as this contains a list of all your customers. Yes, they may well have signed an Agreement but suing someone after they’ve marketed your client base is hard work … just don’t go there.
Buyers frequently use advisors who will suggest the same things.
One example is that they will endeavour to block you using the business name or any of the words in the business name. It might be that you have two businesses and both incorporate your surname so try to find a reasonable compromise. Likewise, they may try to block you for being in the industry for 10 years; often 3 years is enough. Explain your reasoning via your broker (before the contract is signed) and most likely a mutual agreement can be reached.
All verbal agreements mean nothing until you have it put into the contract.
Ensure anything you have agreed upon is reflected clearly and succinctly in the contract. Of course, be sure to read the contract in detail yourself. Yes have a solicitor work with you, but read and understand it yourself so you do not come across any nasty surprises. Ask questions from your solicitor if you are unsure.
Good luck, and please be patient. Selling a business can take anywhere from 3 months to 2 years. Your success is dependent on many aspects – some of which are in your control, and some which are not.