How to prepare your business for sale


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For business owners, the thought of selling your business may be quite daunting. However, if you prioritise preparation and engaging with the experts, the process can be simpler than you think!

There’s no such thing as preparing for the sale too early. Preparing your business for sale is a process that requires careful planning.

The longer you have to prepare your business, the better chance you have at successfully selling it – not to say that it can’t be done quickly if need be.

It is important to determine an exit plan early on, establishing a solid understanding of the drivers of business value and targeting the level of profits likely to deliver a successful sale at the desired value.

A crucial step in preparing a business for sale is determining its value. A business appraisal analyses every aspect of the business, from the market value of its assets to its future earnings prospects.

Minimising costs and increasing annual profit by a modest amount can add to the potential sale price.

An expert’s opinion, who has relevant comparable business sales data, on what your company is worth will help you determine whether now is the right time to sell; and how much you might be able to sell it for.

It will also give an insight into how to improve the business before placing it on the market.

Timing is everything. Bringing the business to market when it can be shown to be running at peak efficiency, and with a solid record of profits trending upwards, is always going to result in more buyer interest.

This may require trimming of costs, greater sales, and increased profit margins and reviewing other variables.

Minimising costs and increasing annual profit by a modest amount can add to the potential sale price. A healthy and thriving business with robust financials and a smooth operation is likely to sell more easily.

A business is more attractive if its success isn’t solely dependent on the owner’s operational know-how, technical skill or personal relationships with clients or suppliers.

Having an experienced, reliable management team demonstrates that the business will remain successful post-sale.

Clear signs that there are competent staff tasked with spreading the workload and helping drive the business forward are crucial to giving buyers confidence that the business will continue to perform post sale.

Getting the records in order is one of the most important steps you can take to prepare your business for sale.

Review all financial statements from the past few years and make sure they’re accurate and up to date.

Your accounts should be organised and include everything relevant to the business. It is also key to provide a set of ‘normalised’ accounts to show maximum operating profits, as well as your actual accounts.

This means adding back expenses that are not directly related to operations – and being prepared to discuss these with potential buyers. This can make a big difference to the selling price.

You may have experience running a successful business, but does that mean you are right person to sell it and to achieve the best return?

Hiring a team of experienced professionals, who can represent your business appropriately, have experience in business sales with access to relevant comparable data and an insight of the industry will help you find the best position for your business.

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Steve Catley
Steve Catley
Steve Catley is a Business Broker at LINK Business Brokers. He can be contacted at 021 341 117 and steve.catley@linkbusiness.co.nz

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