Streamlining the sale of your business

• Exiting a Business

The sale of a business can be a daunting and stressful time for any owner.

Unlike many other business decisions, there is only one chance to get the sales process right.

When the decision has been made to move on, the selling process, financials, valuations, and business operations all come under the microscope. Afterall, the more confidence the buyer has in your business, the more lucrative it becomes and the higher the value of its worth.

Streamlining business operations with a clearly defined strategy is essential to achieving a successful sales process and end-result transaction.

Reason for the sale

For many buyers understanding the reason behind the sale is a first point in the early stages of the deal.

There are many valid reasons why business owners decide to bring their business to market, including:

• Retirement of the owner
• Lifestyle change
• Financial acquisition
• Further opportunities

Whatever the motive to sell, establishing a unwavering reason for the change and allowing the time to plan and execute all the necessary moves is essential to the success of the sales process. 

Critical to the success of selling your business will be planning the sale. Potential buyers are typically looking for a business that is profitable, easy to manage, low risk and has good cash flow as a starting point. Long term planning will allow you to maximise the return on your investment into your business, make the sale less time-consuming, attract the right buyers and achieve your financial and non-financial goals of the sale.

Preparing your business for sale

Once the decision has been made to exit your business, these five key actions will help you prepare for the sale.

Settle on an appropriate sale date

Selling a business is a very different beast and therefore requires the time to ensure maximum value is achieved. Experts suggest that the planning stages of the sale should begin up to one year before the business hits the market, allowing time to successfully complete necessary actions.

Rushing the process can prove to be detrimental to the sale and the profit margin. 

Get your business into shape

Use the time before the business goes to market to identify any areas that require attention or change. Tidy up financials including paying outstanding creditors and reverse out any personal expenses.

Working with advisors, determine the true operating profit for the business and have a few years’ worth of solid financial records ready to present to prospective buyers.

Ensure employee contracts and leasing agreements are up to date to show a security of tenure, which is important to the buyer.

Other areas to “tidy” may include:

• Updating policies or procedures
• Disposing of obsolete stock or any other asset
• Collecting outstanding debts
• Encouraging employees to take leave to reduce possible leave entitlements

Compare the competition

Understanding where a business sits compared to its competitors allows for owners to put their best foot forward when it is time for the sale.

Did you know? Benchmark data can be accessed by the Australian Taxation Office for comparison of your financial results with other businesses similar to yours.

This can assist in identifying areas that need attention before putting the business for sale, as well as highlighting the positive and unique areas to emphasize to potential buyers.  

Valuation

Before putting a business on the market, have a professional value its worth so it is clearly understood what the potential sale price could be.

Also, decide in the valuation what will be included in the sale, such as:

• Lease or property
• Contracts
• Stock
• Training

Consult the professionals

Once the decision has been made to go to market, meet with professional advisors to help with preparations for the sale.

How can we help?

Elevate Accounting work with clients to clearly explain the sales process and manage the transaction. The experienced team play a valuable role in managing the sale process on behalf of the client.

Elevate has close connections to many high net worth individuals and private equity groups, who are always interested in reviewing good businesses which are for sale.

Elevate helps business owners with:

• Trade Sale
• Management Buy-in / Buy-out
• Family Succession (see more information on this HERE)

To learn more about streamlining the sale of your business, book your obligation free chat with the team at Elevate Accounting HERE.