Avoid Disaster! How To Sell A Business With These 5 Critical Tips

INTRODUCTION:

Recently a couple of my blogs have talked what you should do when you want to know how to buy a business. Of course on the other side, do you know how to sell a business for a maximum price?

Figure 1: Consider these tips and your ship may just come in!

1. Understand your business valuation

If you want sell something, it's always a good idea to know what would be a reasonable value for it. A business valuation by either business valuers Sydney or your small business accountant Sydney will assist you particularly if they are experienced.

To get a lower or higher business valuation, emphahsise the positive points that will reduce the risk for the purchaser. The lower the risk the higher the multiple of earnings should result. Whilst business valuations will also take into account some things that aren't great, focusing on the good things will stand you a much better chance of getting a higher price.

Some of problems highlighted by the business valuer may in some cases be addressed immediately. It is better to find out now rather than have it discovered during the negotiating period and due diligence process.

Even if you can't sell your business for what you want right now, you will at least know what you need to be working on for next time. This is where business coaching may assist. What you should find is that with a bit of work, business growth and profitability will improve over time.

2. Know when to sell

Getting a maximum price for your business is all about timing. It's generally better to be able to show a prospective purchaser that the business is on the way up rather than the other way around.

What is your industry doing? Is it facing challenges or is it coming up to better times due to the economy, government legislation changes or for some other reason (competitor getting out etc).

Figure 2: Selling a business is about getting your ducks in a row!

3. lock in contracts!

If your business has location goodwill, ensure your premises have a contract that will provide security for the buyer over a number of years.

If you have contracts for your products or services and for your suppliers at great rates or for reliance on the supplies they provide to you, shore them up also.

You see once again it's about minimising risk for the buyer. The better you can do these types of things the less risk and then you are in a much better position to command a premium.

4. Have a Plan For the business even if selling

It always helps if you can show a buyer what your plans and projections are for the business over the next few years (ensure a confidentiality agreement is signed beforehand though!).

If you don't have a business plan in place, this may suggest to the buyer that you don't really think the business is going anywhere or has many opportunities and either cause the buyer to walk away or offer a much lower price.

A cash flow forecast or 3 way budget always looks good and may even assist the buyer to get finance from their bank taking the inability to finance the purchase out of the equation.

Figure 3: Get together and discuss tactics before you go to sell a business.

5. Get great legal & accounting advice

You are the one selling the business so make sure you structure a deal through your business advisors that makes sure:

• you get paid in full;
• you minimise income tax and capital gains tax with the transaction;
• you limit any future legal liabilities;

There are many small business solicitors and small business accountants Sydney if you are currently not getting the advice you need. Make inquiries accordingly.

CONCLUSION:

When you go into business, usually there will be a thinking that one day you will hope to sell it and if you do, for the maximum price possible given the risk, blood, sweat and tears over the years.

Follow these 5 simple tips and give yourself the maximum chance to succeed and enjoy either your next project or retirement!