If you are wanting to get maximum dollars when selling your business, here is what you need to do:
- Great financials. The sale price is essentially worked out on profit. There is a formulae, and other factors, but basically, the greater your book profit, the bigger the price you can ask. When I refer ‘book profit’ that is what runs through the books (legally) … so don’t try to sell a buyer about all the cash you took under the table (which is illegal as it’s tax avoidance) as a savvy buyer will not consider that component. Yes, there are ‘add backs’ but do be conscious of the deductions you maximise. If you claim every little (and often personal items) through the books, you’re reducing your profit. Your books needs to be clean, accurate, up to date and reflect a strong business. If your bookkeeping is rubbish, then this needs to be tidied up first. You need to have 3-4 years of great figures and that is often where I’ll work with clients as a business coach for a couple of years to help build up the profits.
- Stock, Debtors & Creditors. Don’t be overstocked when it comes to your trading stock and be sure to pay your creditors on time. The last thing you want is a prospective buyer doing some research and finding you have a bad reputation. A huge list of creditors on the books implies you have a cash-flow issue. Likewise, ensure your debtors are not too large and out of date. The buyer is buying your customers (along with the business) and they want good customers who pay well.
- Great systems and setup. The buyer needs to know this business functions effectively. By having clear systems and processes (which are fully documented) they will have more confidence that this business can effectively operate without you and is stable and strong. Systems are the backbone of a strong business.
- Ownership and continuity. Ensure that you own all your IP … by this I mean that your ownership of your website domain is current, trade marks are registered, your business name is registered in your name and a long lease is on your premises. Project your Intellectual Property. Please, don’t let a lease lapse, or worse cease a lease. Keep your advertising going – operate the business as if you were staying on another 10 years. Will a buyer be interested in your business if your equipment or machinery is being held together by a chewing gum and a prayer? Keep maintenance up and don’t let the business run down. Try to stand back and really look at your business from the outside, in. Just like when selling a house, ensure the premises are clean and tidy as well.
- Step away from the business! It’s important that the business (to be most saleable) can operate without you. You may well have founded the business and it’s your baby, but there comes a time you need to step back. Ensuring your team can operate this without you (or with your minimal input) and things can tick over without you is very important. This can be very hard for some owners, and often needs a chunk of re-education with the owner. I’ve worked with many owners to stop them from being the business and start being the owner – changing both mindset and daily actions. It’s often about re-forming old habits where we don’t even realise we are working in the business, rather than on it.
- Get a Broker & Price it Right. My final tip is to work with a professional seller. You may well feel that no-one knows your business as well as you, but are you an expert on selling a business? Do you have the database of keep buyers? Selling a business is harder than it looks and having a third person as a buffer between you and the buyer really does make the difference. A good broker will also guide you on how to correctly price the business.
When we sell a house, we often spend time and money freshening up the premises to maximise the sale. The sale of business will likely (next to your home) going be the biggest asset you will sell. Plan your strategy, be prepared and if it’s not ready now, start working on your business to make it great and all but guarantee to maximise dollars when it does go on the market.
Check out my business consultancy services and call me at 0411 622 666 so we can talk.