Preparing to sell your business doesn’t have to be overwhelming if you look at your business through the eyes of a buyer. While selling can be emotional, it’s important to look at the strategy, structure and financials of your business clearly so you can showcase them to potential buyers. Here are the key points to consider when thinking of selling your business.
1. Get ready to sell well ahead of time
Your business will look most attractive to buyers if it has a great track record. If you’ve been running the business as profitably and professionally as possible, your business will look good to both you and potential buyers. When sale time eventually rolls around, you’ll be in good stead. If you wait until sale time to focus on profit and management structure, it’s too late.
2. If you don’t have a clear strategy, create one as soon as possible
Buyers love to see that a business has a clear vision, plan and strategy for the future, so they can see where your business is going and what its goals are. If you don’t have a clear strategy yet, enlist experts to help. Management consultants can help you create a clear map of your current business, with a plan on achieving future goals. This can be summarised into a one-page document to be presented to potential buyers.
3. Investigate and mitigate risks
No buyer will expect your business to be perfect, but they will expect your senior management team to fully understand and manage all risks. When preparing your business for sale, you want to evaluate all your current risks from obsolete stock to litigation and revenue concentration. Potential buyers will ask to see a presentation of current risks, along with a cohesive plan for mitigating them moving forward.
4. Consider all finances: Past, future and personal
Ensure all past financial documents are clear and concise, and readily accessible for potential buyers. Showing you have maintained clear records is important to potential buyers, and so is their content.
You’ll also want to present a forecast of financial projections for the next year, and ideally up to the next three years. This helps potential buyers tie your business strategy to your future projections to generate a clear picture of the future of the business.
Ensure all personal finances are separate from the business. This may seem obvious, but if your personal assets seem entangled with your business, you will scare off potential buyers.
5. Formalise agreements with suppliers
Interested buyers will value your client list, and the established supply chain your business utilises. If you’ve been operating on ‘good faith’ or ‘handshake deals,’ formalise agreements with all the parties as soon as possible. Once these deals are solidified, potential buyers can be assured these valuable relationships come with the purchase.
6. Ensure your management team is well-structured and get them onboard with the potential sale
By the time you’re looking at selling, you want to have a well-established management team that’s skilled, professional and well structured. This team needs to run the business without you.
It’s also advisable to have a well-established board with at least one external, objective member. This team will be so strong and independent of you, when you tell them you’re planning to sell, it won’t hugely affect their day-to-day work lives. A solid management team helps potential buyers feel secure in the business’ structure and daily operations.
7. Investigate the market discreetly
Like any seller, you want to get out there and understand the current market for your business, but you need to do it discreetly. This will give you real-time information about the current market, as well as understanding the wants and needs of potential buyers.
8. Call in the experts
Selling a business is not like selling a house; you need to have months of well established management structure, proven financials and clear projections of your business’ future. Once potential buyers show interest, you’ll also need to ensure you are protected to get what you want from the sale. The best way to get your business ready for acquisition is to enlist experts from lawyers to tax advisors.
Tailored small business consulting from Plan 4 Profit can revolutionise industry for a fledgeling, expanding and established organisations alike. Our broad range of consulting services are available to companies at every level of growth.
If you’re thinking of getting your business ready for acquisition, start preparations early. Establish everything from clear structure, to clear financials and potential buyers will love the clarity you present.
