Right, so you’ve decided to sell or are considering selling your business; this is an important decision you’ve made. But have you done your homework so as to get the most valuation and highest possible price for your company?
Proper preparation, they say, prevents poor performance. This is certainly true in the business-selling process. You could get the best price for your business by preparing it well for sale. Appropriate pre-sale preparation is important for securing high valuation and sale price.
Although pre-sale preparations vary from business to business, industry to industry and market to market, whatever your specific situation it is important that you fully put your house, well…your business, in order. Get the process right and make it impressive to prospective buyers so as to increase its value and secure the highest sale price for it.
We’ve come up with six main ways you could achieve this, they include:
Investment in technology (both hardware and software), effective processes, excellent and well-motivated employees – all constitute a major booster of the valuation and sale price of a business. You need to ensure that your operational arrangements efficiently and sufficiently enable the business to be run without the vendor.
Your company needs to have established business systems, processes, human resources and management structure that operate independent of you and any other owners/directors. The valuation and sale will be boosted even more if your systems, processes and people are so effective and robust that the company’s operations can be easily replicated if required, thus giving the potential buyer great opportunity to grow and expand it after acquiring it. This element of your business will doubtless impact the valuation and raise sale price.
The best of the best is in the gathering of the best. In other words, the best potential buyer can only be gotten when you attract the right potential buyers. To get the right buyer and sale price for your business, it’s vital to reach and attract the most reliable prospective buyers in appropriate ways.
Getting the right potential buyers is as essential as the sale itself. You need help in choosing the right sale approach and pricing; this requires professional assistance. If you want, then we can help you find and qualify potential buyers.
This is one of the crucial elements of the business-selling process. Key in it is the Information Memorandum (also called Sale Memorandum), which should impress and attract potential buyers, heighten their interest in the sale, make it competitive and consequently increase the valuation and sale price.
The Information Memorandum is designed to give potential buyers concise insight into the company and to initially assess the sale. It contains salient information about the company – such as: history, ownership, structure, operations, industry and market, products and services, customer base, assets, employee data, financial performance, why the sale, why it makes a good investment, asking price and terms.)
It must be entirely truthful; but it must also be compelling and present a strong case for the health and potential of the enterprise in question. Given its confidential nature, it should only be given to pre-qualified potential buyers upon signing a non-disclosure agreement (NDA). You should endeavour to generate much interest from potential buyers without releasing important company information at this stage. It’s a balancing act you must get right.
So how do you arrive at that right asking price? First off is the company’s total asset value. This comprises the values of both tangible and intangible assets. The value of assets is a key component of the asking price.
In determining the right asking price, you should also consider the business’ return on investment, market value, recent average sale price of similar-sized companies in your industry and estimated cost of starting a similar business currently. Don’t overprice the company though. We can help you get the target price right so you attract the right type of interest at the right level.
Creating a competitive bidding process for your business will achieve the best sale price. You see, it’s all about human psychology and economics. If you succeed in attracting a lot of serious prospective buyers, and they’re keen on the purchase because of the performance and potential of your company, many of them would be anxious to beat the others to it and lock in the deal.
Just as with live auctions, it’s only when there are two or more interested parties involved that the bidding war really starts and prices rise dramatically in the latter stages of the bidding ‘war’.
Now, it’s crunch time: negotiating and closing the deal. Upfront, you must specify your terms and conditions clearly. Decide in advance what’s negotiable and what’s non-negotiable. Research the potential buyer’s history, business experience, investment needs and expectations to be well informed as to who you are dealing with, and help your negotiating position. However, for winsome negotiations, all parties’ interests matter.
Be reasonable; give and seek concessions when appropriate and helpful for the success of the deal. Oh, and the books. Yes, your books will be well scrutinised by the potential buyer and his professional advisors. As such, get them in good order. Make sure all the necessary documentation and other information are all ready for study.
Also, avoid appearing an overenthusiastic seller. No matter how urgently you need to sell, don’t appear or sound desperate. Maintain your dignity as a business owner. Make sure they know you have other options, including continuing to run your company.
There is also the small matter of your own appearance as a business owner. You need to look the part: impeccable appearance, body language and comportment can positively influence the buyer in the process for the good of the sale.
So, there you have it. You may find the business-selling process overwhelming, but we’re here for you: to help you through it all successfully. Get in touch.
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