The Ideal Preparation Time to Sell your Business

The Bigger Picture In Selling Your Business

The Ideal Preparation Time For Sale

Sell your business for more

Preparing for a business sale takes months and even years. The longer you have to put it in good order, then the better the results of any sale process are likely to be, so start the process at least six months before. Just like a home that needs a little attention given to its upkeep here and there prior to putting it on the market, most business could do with a bit of a spring clean before you start letting potential buyers examine your records and balance sheet.

So when it comes to anything in business, the more time you take to prepare, the better. However, you should remember that the aim of the preparation is to maximise your business’ potential sale value. You could, of course, attain your dream price at point of sale with no preparation whatsoever. But this, it should be said, would be more down to luck than judgement.

In most cases, careful preparation of a business sale over a year long time scale will reap its own rewards. Remember that an astonishingly high proportion of businesses that go up for sale are never, in fact, bought. This is usually down to a lack of preparation. Therefore, when it comes to selling your company interests you should ideally plan over as long a time period as you can, so try to think about it from eighteen months out, if possible.

However, we all know that the day-to-day demand of running a business may mean that this is not always realistic or possible. Furthermore, sometimes people who own their own firms need to sell up on a time scale that is not entirely of their own choosing, perhaps due to family commitments or ill health. Nonetheless, you should plan your sale with whatever time resource is at your disposal if you are serious about extracting everything you can from a buyer’s offer for your company.

Increase Profitability

You need to give yourself as much time as possible, perhaps even years, to increase your firm’s profitability since this is going to be one of the headline factors that many potential buyers will look at before anything else. Not been turning much of a profit over the last couple of quarters? Now is the time to turn that around by activities, such as:

  • Ridding yourself of debt
  • Selling unused assets
  • Driving down costs
  • Increasing sales volume

If you need to make your sales graph look like the proverbial hockey stick, with a healthy upturn in the most recent period, try some sales promotions which means customers simply cannot resist placing multiple orders. In addition, it is now that you should be getting tough with your debtors, so take time to work hard on your credit control function.

A few overdue sales invoices that are paid up can make all the difference to the health of your figures.

Secure Longer-Term Revenues

As well as the short-term profitability that will be under the scrutiny of any potential buyer, you need to think about what will be in the business for them once they take over. Project forwards two or three years at least and offer customers contractual tie-ins or service agreements that mean your can forecast some business income into the future.

This means planning at least a year beforehand, if you want to sell annual subscriptions, although you could feasibly shrink this time scale if you opt for a monthly or a bi-annual charging structure.

Improve Your Processes

Have a look at all of your tried and tested methods of service delivery. The more time you have to inspect what your team is doing, the better. Improvements can always be found. After all, the maxim of any business should be that it can improve at all times. No one has the perfect way of doing things and just a few minor adjustments to your processes can pay surprising dividends down the line. Look for efficiencies that you can make which have a positive outcome on your bottom line, such as dividing jobs up between team members so they can focus on one thing at a time.

Even if your changes don’t have an immediate outcome, you will be able to highlight the process improvement strategies you have initiated, thus making your business more appealing to them overall.

Keep Senior Management On Board

When you announce your departure from a firm, some senior people can feel trepidation about the future. After all, so many long-standing staff will have built their careers around your drive and ambition. Before announcing your decision to sell, give longer-term incentives to your key team members that will make the likelihood of them leaving for pastures new at a crucial part of the sale that much less likely.

Improving pension arrangements or building in deferred bonuses are two good techniques that will help achieve this, as well as backing the new owner.

Show Sustained Growth

Ideally from the furthest point back in time prior to a business sale, demonstrating growth is essential for a good valuation of your company. Sometimes you will need to cut your margins – to an extent – in order to show growth of turnover or of market share, in order to take more business away from competitors.

Therefore you need to balance this carefully against your profitability. Furthermore, remember that all businesses can grow by diversifying into new areas as well as investing in their core business, so you may like to consider this option, too, so long as you have enough time ahead of your proposed sale to see it through.

Clarify What Is For Sale

Many business purchases fall down over confusion about what is up for grabs and what is not. Don’t fall into this trap when everything else has been properly prepared in advance. Clarifying what is on sale is not simply a question of communicating successfully to potential buyers, but often involves you thinking about what you are willing to give up and what you are not. It is time to decide which parts of the business, if any, you want to retain. You may, for instance, like to keep hold of some intellectual property or half-developed ideas.

Another common problem area is whether major assets, like business premises, are part of the sale – something that often causes problems for people who own premisses which they rent to their company. You need to be upfront about these choices from the start of the process and not make your mind up towards the end of it which could be misinterpreted by buyers as a wishy-washy approach. Remember that if too much is left out of the sale package, you may not have a compelling enough proposition to attract good offers.

Some of the things mentioned here can take at least twelve months to put in place and then a further six to twelve months before they impact on your financials. If you need to sell before then, do these activities anyway. Even if you are undecided on whether to sell or not, the time to start is today.

It is worth remembering the old adage:

Every business should be available for sale, if the right offer comes in…

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