Firstly, what is your readiness to sell! That is, has your decision to sell been planned for several years now, or is it a knee jerk reaction to an event that has happened recently? Have you thought about life after you sell your business, how much money do you need from the sale to put yourself in a good position for the future? Are you prepared to move on and do something else and/or retire, and what plans have you made for the next step of your life?
A considered and planned departure from your business is always the best option, one where you have time on your side to get things right in the key areas within your business, such as quality control – customer service – competitiveness – marketing – profitability – stock control – human resources – the lease and the owner involvement levels. Sometimes business owners also forget the hidden financial benefits they have in owning their own business, such as personal or quasi personal expenses that are run through the business. Things that, when you sit down and think about it, really add up to quite a lot of money, and won’t be available to you after you sell. Some of these can be easily added back to the financials of the business to demonstrate the likely benefits or profits to a new owner or buyer, while others may not, and are just expense items or practices that add to the cost of running the business. Conversely, some such practices maybe intended to reduce operating expenses for the business, but in reality, can reduce actual profits and make the business less attractive to a new owner or buyer. If you want to come out of the sale with enough funds to retire with, or go into a new venture with, then you need to get your ‘house’ in order first to maximise the sale price.
This is where it can become a little tricky, and as a potential seller of your business you must do your own cost benefit analysis in every way. This means considering things like; if I keep operating the business for say another 2 years and increase turnover by ‘x’, will that improve profits enough to achieve a larger sale price? Most business appraisals prepared ‘for the sale of a business’ revolve around profit, and the more profit the better. They look at what the business is worth as a going concern and its market value, so profit is important. This is when you need to sit down with your accountant to help nut things out and run a few ‘what if’ scenarios. After which you still will need to consider if keeping the business for another 2 years just means increasing borrowings, staff levels, plant & equip, rent and other overheads, and owner working hours, and will that may make it less attractive to some buyers? Then there is the personal cost, mental and physical, and the adverse changes to lifestyle and family time, so clearly there is a lot to consider either way.
For more details on the above, and an action plan for selling your business, call me or one of my team for a business assessment today.