28 Jul How to maximize profit when selling a business
Buyers of businesses do not want to discover unexpected costs, personnel issues, lost sales or other challenges after they have bought a business. These buyers are prepared to pay a fair market price for a business if it can be shown there are no hidden problems waiting to happen.
The seller of a business increases their chance of receiving the best possible price if they gather and organize all the relevant sale information in advance and present it in such a way that all potential buyers can see the enormous opportunity a business offers.
No surprises are hidden in the documents and confidence in the sales process is high. With that in mind, here are some of the main factors to consider when selling a business.
Select your advisors carefully
While the cost of professional fees can reduce the eventual profit of a business sale, selecting the correct advisors can also help a seller attain a higher price for the business. Expert knowledge on how to present financial information, clarify legal issues and contact potential buyers all helps achieve the best possible price for a business.
Employing a broker to handle the sale of your business can free you up to continue running your business while all matters relating to the sale are handled separately. This ensures business operations or sales do not suffer during the sales process and potentially reduce the value of the firm.
Place a fair valuation on the business
Every seller wants to get the best possible price for their business. However, setting an unrealistically high valuation will more likely put off potential buyers and take longer to achieve a sale. All sellers must balance the need to achieve a sale within a specific timeframe and a realistic price the market will accept.
Don’t forget, a profit is only achieved when the business is sold. Setting the valuation too high will mean the business is not sold and no profit made at all.
Ensure all paperwork is up to date and well organized
Ensure all your administrative paperwork is current, completed and easily accessible. This gives confidence to buyers that they are buying a well-run, efficient business that is worth the valuation placed on it. This approach also ensures no hidden surprises lurk for the buyers.
Ensure this information is organized in a logical manner and is easily, but securely, accessible by a potential buyer. Many companies choose to use a “Data Room” to safely store the documents relating to the sale of their business.
Ensure the business finances are up to date
All financial accounts must be up to date with the appropriate tax authorities and a clear picture of cash on hand, profits, losses, debtors and creditors must be available to prospective buyers.
The accounts for previous years, signed off by official auditors, must be available for review.
Define a clear picture for the future of the business
A buyer of a business must consider the potential the business has to offer. The more promising the future of the business, the more likely buyers will be prepared to pay the best possible price.
Sellers should explain the unique aspects of the business that make it stand out from competitors, the opportunities for expansion to other markets, the pipeline of sales already secured for the months ahead, the overall health of the industry the business operates in, the economic climate and opportunities in the local market to expand and grow.
There are many aspects to a business sale and every case is different. However, if you follow the above steps, you will give your business every chance of being bought for the best possible price.