Selling your business is a complex process. To ensure it goes smoothly, and to get the best possible price for the business, you must plan the sale carefully. This article looks at the steps you should take and some of the things you should think about.
Be Clear on Why You Are Selling
There are lots of legitimate reasons for selling your business. The point here is the buyer will want to know and will want to have confidence in your reasons for exiting. Therefore, make sure you are clear in your mind, so you can explain it to them.
Prepare Well in Advance
Selling a business takes time, so start your preparations in advance. Usually, this means at least a year, if not two. You will need this time to go through the planning stages to ensure you have everything in place. You will also need this time to find buyers, negotiate, and complete the deal.
Run the Business Well During the Planning Stages
Don’t start thinking you are out of the business too soon as you might stop giving it the attention it needs. When a buyer starts looking into the business, every aspect will come under scrutiny. Therefore, make sure you run it properly, maintaining healthy sales volumes and cash flow.
Get Your Business Valued
You will need to put a price on your business, and will probably need external help from an accountant, business advisor, or broker to do this. As with all things you sell, it is important to ensure the price is not too high and not too low.
Also, the way you value the business is important. Some business owners look at the performance of the past three or four years, while others look far in advance at what the business might eventually grow into. A buyer is unlikely to base their valuation on either of these things. Instead, they will look at what can realistically be achieved in the short and medium term, i.e. within the first year and then within the first three to five years.
Look at Your Business from the Buyer’s Perspective
You will need to start looking at your business from the perspective of potential buyers. This can be difficult, particularly when you are so heavily involved in running the business and if you’ve built it from nothing. You need to become more detached, however, to see things how the buyer sees them. This will help you in negotiations and it will help you prepare the business for sale.
Make Sure Your Accounts and Returns Are Up-to-Date
Part of getting the business ready is ensuring it is up-to-date with tax returns, including VAT. Also, to prepare for the point below, you will need to ensure your accounts are up-to-date.
Prepare Financial Statements
The buyer will want to see the financial performance of the business, so prepare full financial statements that date back about four years. It is also helpful to include projections of what you think the business can realistically achieve in the short to medium term.
Finally, get outside help to assist you through the process. This will give you the experience and knowledge you need plus a fresh pair of eyes will spot things you might miss.
Once you do all the above, you will be ready to start looking for buyers.
For more help and advice with your business, please contact a member of the Gilroy Gannon team today.