If you are considering selling your business in the next five years, then here’s how to get your ducks in a row for an optimum sale.
Think of selling your business like selling your home. If your house is a fixer-upper, then you expect to sell it for quite a low price and it can hang around on the market for a while. If your house is problem free, well-maintained and ready to move into, you will be inundated with viewings and sell it for a good price.
Most business owners have put their life and soul into building up their business; taking home a modest salary in order to invest more in their ‘baby’; putting pension planning and savings on the back-burner until it’s too late. If you’re one of these business owners, then you will want to sell your business for enough money to fund your future.
Arm yourself with documents
Potential buyers will want to see the paperwork that shows your business is a successful money-making machine. Keep your paperwork up-to-date and document everything (if you don’t already). This will mean when you come to sell, you will have at least a few years’ worth of paperwork to show the buyer.
Having a good Financial Controller can help with producing timely and accurate reporting. Plus, an FCO will ensure your business has strong financial controls. Having sound cash flows, balance sheets and lower expenditure and good profit margins will make your business attractive to buyers.
Creating a well-oiled machine
The finances of your business will be crucial for the sale. To sell your business for a good price, you will need to be driving profitable sales, plus have cost-effective outgoings that are achieving a good ROI. Consider renegotiating terms and prices of contracts that are nearing renewal with clients or suppliers.
Where overheads are not producing the level of ROI required, trial a few alternatives or consider cutting them completely. Remove non-business assets form the business (does the business really need that boat or apartment?) and monetise redundant or under-used assets.
Boosting your profits will increase your business valuation.
Selling your business is not the time to be a linchpin
If someone is going to buy your business, then they want to be sure it can run successfully without you. Business owners wear several different hats when starting out: HR, marketing, business development, handyman. You name it, they do it. This can sometimes be a hard habit to fall out of. However, it is essential to recruit a good team for business growth, and ultimately for the sale of your business. Being the sole driving force behind your business can negatively affect your sale.
Before the sales process begins, you should start removing yourself from the day-to-day operations of the business. This will make it easier for prospective buyers to assume a smooth takeover, as well as preparing the business for a time if and when the new buyer wants a less active CEO role in the day-to-day operations.
Get a good team of professional advisers backing you
Selling your business can take months or even years to complete and can be a complex process. It’s better to get your team of advisers together early in the sales process to ensure an optimum sale. You will need an accountant, solicitor, financial planner, banker, and corporate finance specialist.
It’s likely that your business will already have an accountant that is great at the day-to-day stuff. You need an expert team behind you, so it’s best to evaluate if your accountant has the right skills and experience needed to work with you on the sale of your business. There are plenty of accountancy firms that solely focus on helping business owners at the point of sale. Your chosen accountant will advise on tax-efficient selling strategies and help with negotiations and contracting of terms.
A solicitor is usually one of the last people you bring in to help close the deal. They help you to negotiate the terms of your business and the legalities of the business transaction. Bringing a solicitor into the mix early can be beneficial for early negotiations. This ensures you sell for the best terms possible for you.
A chartered financial planner who is experienced in helping business owners at the point of sale is essential. Your financial planner will work with you to calculate how much money you need from the sale to live comfortably for the rest of your life. They help you map out your future and create a financial plan and sound investment portfolio to help you achieve your life goals. Having your financial planner involved as early as possible can help you with key decisions, such as how much you need to sell for, when the best time to sell is, and your exit strategy.
An independent and unbiased corporate-financier will be able to give you a realistic valuation of your business within the current market place.
Knowing how much money you need and how much money you could sell for at this time helps you to evaluate whether your business is ready to be sold. This, of course, should not be the only factor involved. It’s important to consider whether you are ready as this is a life-changing event. Take a look at this blog to look at how to prepare your life for post-sale life.
At Capital, our chartered financial planners are experts in helping business owners at the point of sale. Our expertise can help to successfully guide you through the process ensuring a pain-free and optimum sale. Your Capital financial planner will be able to help prepare you for post-sale life and support you in the process of selling your business.
If you would like guidance on selling your business and discovering how much you need from your sale to live your desired lifestyle, click here to Contact us.