Nearly two out of five small business owners want to sell their business, according to research commissioned by American Express as part of the recent ‘Shop Small’ campaign.
With more and more businesses coming on the market, ensuring your business is well-managed, profitable and ‘sale ready’ is more important than ever. The sooner you start planning to sell your business, the better prepared you will be.
Planning for a business sale
Focusing on these key aspects of your business will increase your chances of achieving an outcome that meets your objectives and delivers a good return on investment when you sell:
- Business documentation in order
- Processes clearly documented
- Systems are capable of providing quality information
- Technology and software are current and in good working order
- Staff employment agreements are current
- WIP & debtor recovery is strong
- Financial performance is strong and has an improving trend
- Budget to actual performance is documented and actively managed
- Arrangements with business partners, service providers etc are documented and up to date
- Your business plan is well documented and being implemented
Reducing principal reliance
If your business is principal reliant, it may be difficult to find someone willing to take it over. You will need to reduce the dependence of your business on the principal and any other key staff who will be leaving the business at the time of sale. You may decide that an internal transition of ownership is your best exit option. A staff member is often the best person to consider as a future successor as you can start transitioning client management and other responsibilities much earlier than if you were selling to an external successor.
Strong business relationships
Ensuring you have strong relationships with your clients, suppliers and business partners will lower the risks in your business and make it more attractive to a future purchaser.
Key value drivers
Focusing on these additional key value drivers of your business will also optimise its value and ensure that you get the best price when it comes time to sell:
- Loyal customers
- Innovative and different
- Benchmarking performance
- Good systems
- Loyal & committed staff
- Growth and succession planning
Steps in planning for sale
Thinking of selling your business in the near future? The following is a guide to what you need to do before putting your business on the market or approaching potential successors:
- Prepare a Selling Memorandum – includes unique selling points
- Prepare a Register for Sale – documentation to be given to potential buyers
- Obtain a business valuation
- Discuss your proposed sale with your accountants and obtain tax advice prior to sale
- Determine the purchase price
Please contact your local Accru office to discuss how we can help to prepare your business for sale and achieve an optimal price when the time comes to move on.