Warning: Don't Try To Sell Your Business Until You Read This

INTRODUCTION:

The time has come and you would like to know how to sell a business. You've searched for some business valuers and you're looking for a decent broker.

The estimated business valuation comes in and you realise it will barely pay out the loan let alone provide you with a decent retirement.

How could this be? Years of blood, sweat and tears and for what? The business valuer says the value is being hampered by the fact that the business relies too much on you. The reality is that besides profitability, one of the biggest upwards drivers of business valuation multiples is small owner reliance. This is purely because it reduces risk to a prospective purchaser and when you reduce risk, the business multiple goes up and so does the sale price.

So what do you need to do to get this fixed?

Figure 1: How to sell your business 101. Having a business that can almost run by itself drives up business valuations dramatically.

1. Create or review your organisational chart

Documenting an organisational chart helps you or anybody else to get a helicopter view of which people work where and what their responsibilities are. This should give you an idea on what the various sections of your manual will be called or allocated to.

You should have things like the:

• Management Team (steering);
• Finance Team (accounting and tax);
• Marketing and Sales Team (business growth);
• Human Resources; and
• Operations Team.

2. list your team members & their roles

From your organisational chart list down the names, roles and responsibilities of your team members.

You should also refer to their job descriptions. It might also be a good time to check if these are still relevant or have the roles morphed over time and need updating?

Figure 2: Who's in your team and what roles do they play? Photo courtesy of Scolari Comerford Accountants Sydney

3. Document the how to's

Using the information obtained from steps 1 and 2 above, sit down and go through with each team member what they do each day in their working life getting them to tell you what they do for each task step by step.

Be sure to play Devil's Advocate by asking but "what if this happens or a customers asks this?" etc.

Naturally if you discover any flaws, now is a great time to fix and make improvements!

4. put into a operations & procedures manual

From step 3, transfer this into your procedures manual being very clear on:

• What;
• When;
• Why; and
• How.

Consider getting an outsider to review certain areas where applicable such your small business accountant Sydney.

Figure 3: Have a manual in place and you'll have far more people lined up to buy your business! Photo courtesy of Scolari Comerford Best Accountant Sydney

5. The Litmus test - get YOUR TEAM MEMBERS to go through the manual (but not just their own!)

The manual should be able to be followed by almost anybody. Get your team members to try the manual but don't give them their sections only. Give them each others and see what they think and how they would go of thrown into the other section's roles for a day or week.

Was the manual clear or was it very hard to follow and understand? Make adjustments and remember that even if somebody knew nothing about your business, would they have a good chance being able to run it without you or a key team member? Having stepped through the above will impress business valuers Sydney and will put a big tick beside anyone looking to purchase a solid business.

CONCLUSION:

If you were sick or wanted to go on holidays for 6 weeks, will your business run without you? If you answer "no" or "probably never", consider the above as imagine somebody wanting to buy a business that had "no structure" or "how to" when something happens. Airline pilots have instructions for very good reasons and so should your small business.

Failure to address this will not only avoid a small business airplane type disaster but also drive up your chances of getting a much higher price on sale!