Is Your Business Really Ready for Sale?

Is Your Business Really Ready for Sale?

If the prospect you’ve been waiting for suddenly appeared to buy your business, would you be ready for them?

Just because you’ve decided it’s the right time to sell and you’ve emotionally committed to selling…it doesn’t mean your business is ready for sale.

Many business owners make the mistake of not understanding that being prepared to sell their business and their business being properly prepared for sale, are actually two totally different things.

So before you decide on an approach to sell your business, here are the five things you need to do to ensure your business is really ready to sell.

Because if you’re properly prepared to sell your business… then you’re properly prepared for success.

Step one: Build an appealing business

Step one: Build an appealing business

The type of business that appeals to genuine buyers is one where:

  • Sales are strong and show consistent growth for the past three years
  • Profitability is good – and increasing year on year
  • Your service or product has an enviable reputation
  • Your customers speak highly of you, bring you repeat business and your forward order book is full
  • Your supply chain is well structured and your suppliers understand and support your business goals
  • Your core team are enthusiastic and efficient operators of your business, keen to stay on with the new owner
  • The business runs without your day to day involvement.

Sounds pretty good – yes?

It certainly does. And if everything can be substantiated, it would certainly attract the interest of an astute investor.

Which brings us to the next step…

Step two: Prove that your numbers really stack up

Step two: Prove that your numbers really stack up

Because most businesses are valued at a simple formula – normally 3 or 4 times the adjusted profits – astute investors will want to see your numbers.

Your financial results are critical and must be available for a prospect to view once appropriately pre-qualified and having signed a Non-Disclosure Agreement (NDA).

Initially a top level P&L overview of the last three years trading results and a balance sheet is sufficient for a preliminary assessment.

But to proceed with more thorough Due Diligence, a buyer will expect to see not only full financial statements prepared by your accountant or bookkeeper but also your BAS, PAYG and tax returns, as well as Superannuation Fund contributions.

Confirmation that all the numbers ‘stack up’ will also give the prospective buyer the confidence that they are considering a well run business.

Step three: Dot your “I”s and Cross your “T”s

Step three: Dot your “I”s and Cross your “T”s

Any serious prospect will also be looking for evidence of sound customer and supplier relationships, so if your business has a well organised Customer Relationship Management (CRM) database with documented customer contact and buying history it will certainly be more appealing.

Formal contracts need to be in place for all your employees, as well as trading agreements with key suppliers.

If contracts are not in place, issue them. If there are conflicting figures in the accounts make the necessary adjustments and revisit your reporting obligations. Compile a report of website analytics. Renew the office lease if necessary.

A prospective purchaser will also want to see details of your office leases, insurance policies, stock inventory, website hosting arrangements and depending upon the method of the sale (assets or shares), the appropriate ownership and structure documentation.

Basically, you need to get your house in order!

Step four: Demonstrate your business can fulfil its sales forecasts

Step four: Demonstrate your business can fulfil its sales forecasts

Sales and Marketing strategies will also be of interest to any potential buyer since these have a direct impact on your businesses ability to fulfil sales forecasts.

Increasingly businesses, and in particular service businesses, are relying more and more on enquiries and sales through the web, so if you can provide website and social media analytic data which tracks enquiries and conversions that will also be of enormous value.

Potential buyers are very attracted to businesses that are “future proofed”.

Step five: Help instill confidence in potential prospects

Step five: Help instill confidence in potential prospects

You’ll never get a second chance to make a first impression.

Do the groundwork now to ensure you have everything in place to present your business at its very best. Potential new owners need to know they can successfully continue to operate your business.

Nothing puts off a potential buyer quicker than an ill prepared business. Finding gaps and inconsistencies makes them nervous and suspicious …

…and a nervous buyer is far less likely to proceed with a purchase, preferring instead to move on to the next business opportunity which fills them with confidence.

And at the end of the day, it’s far better to be prepared for a prospect interested in your business and not have one… then to have an opportunity and not be prepared.