Selling your business is not only likely to be the greatest sale you ever make, it is also likely to be one of the greatest decisions you will make – in your life. So what will the sale of your business mean for you personally?
Your business has grown, over a number of years, to become the success it is today. It has been constantly on your mind and, at times, it has probably consumed almost every waking hour. It has been an integral and huge part of your life. But, despite all the stress it has brought, the commitment you’ve had to give it and the time it has occupied you may find the idea of placing it in someone else’s hands difficult to accept.
A handover period can help you adjust to your new life. In many cases, owners stay on after a sale for a period of anywhere from a few weeks to 2 years. They are there to help the new owners and staff adjust, and to provide a guiding hand as the business moves forward.
Some buyers, particularly Private Equity and Venture Capital investors, encourage previous owners to stay on and run the businesses they have bought. If this happens to you, you have the opportunity to secure the financial value and develop the business further. And, in time, when the time is right, you can negotiate an agreed gradual departure.
Whatever you decide about your personal plans, the next question to consider is whether your business is ready to be sold. Potential buyers will want to know about every aspect of your business. Do you have all your financial records, customer records, purchasing records etc. up to date? For many businesses this can be quite a task but preparing business sale information, before speaking to buyers, is vital to keeping the sale process moving later. It also indicates a serious intent to sell.
Furthermore, the more to hand your information is, the more it gives the buyer confidence that you are on top of things. A business leader who can’t recall key numbers – whether profits, turnover, customers or any other key performance indicator– only raises concerns and this can often result in loss of interest or buyer scepticism.
You also need to try and make the whole process a pleasant experience for the other party. In the same way as with other forms of selling, potential buyers should see your business presented in the most favourable light, so don’t forget softer issues such as how your premises look. Are they tidy, presentable and professional? If you visited another company with these business premises would you be impressed? Do you provide a warm welcome and a good cup of tea or coffee?
Although not every business works in pristine offices, many would be visually improved by a lick of paint and a tidy up, even some new business signage.
So, once you have given some thought to your future and prepared your business, how much do you think you can expect your business to sell for?
The most common basis for a business valuation is its financial performance. Using a standard financial Return on Investment calculation an accountant can create value for the business, essentially giving it a sale price.
Once you have your valuation, keep it in your pocket; do not share it with any broker or buyer. It’s merely a guide. Ultimately your business is only worth what someone is willing to pay for it.
A business is far too complex to value simply using financial criteria. Every business has experienced staff with specific skills that differ from those of other companies, it has customers that no other business has, it has a special brand name and it has a set of supplier contracts that aren’t matched elsewhere.
These elements, and many others, all combine to create a unique value. So, valuing your business based only on its financial criteria will normally shortchange it. Always expect more, and be prepared to work towards this goal.
“Be prepared to let your business go, emotionally and mentally, and think about what you may do in the future.
“Be ready to take a lead in the business sale process, have your numbers and your Information Memorandum to hand. With projections, be ready to support these with strong cases and evidence as, by the time the sale comes round, the projections will have become last years’ numbers.
“Prepare your business too: first impressions count in the business sale marketplace just as much as they do anywhere else.
“Achieving a successful business sale is not accidental, most business owners benefit hugely from specialist help.”
If you would like any advice, even at this early stage in the process, then simply call us now on 0333 050 8225.
We connect business owners, like you, every day with the right business partners and are always here to help.