When someone wishes to buy a business they will be looking for -
- Security
- Return on investment (relevant to industry)
- Steady growth
Plus much more
The type of information buyers will expect when looking at your business includes -
- Financials (preferable 3 years)
- Copies of leases on premises
- List of plant and equipment
Plus much more
Tip 2. How to prepare your business for sale
First you will need to ascertain what your business is worth, this could be different from what you want. Sometimes there is a wide gap between the seller and buyer expectations; make sure that you are realistic or can justify your asking price.
If you do not undertake research this could be costly for you if you are above market expectations. We recommend the following strategies to test the market for the potential value of your business. Be careful, not all businesses are the same, different issues affect the price.
You should -
- Visit web sites that advertise businesses for sale
- Watch the newspapers for similar businesses
- Contact brokers/agents in your area. (please do not waste their time) offer to pay them for their service this will usually range from $500 - $1,000 depending on the size of your business. Only do this if you don't agree with our assessment.
Once you have established the market value you will then need to prepare it for sale.
The information that is available about your business will need to be collated and explained in a clear and professional manner. A profile or memorandum of information is the tool for this and forms part of our overall service. There is no one that knows your business better than you and you can sell it, providing that you -
- Are prepared to deal with time wasters
- Are prepared to answer questions that may be obvious to you
- Don’t misrepresent your business
plus many other issues
Once the profile or memorandum of information is prepared you are ready to commence marketing your business and hopefully you will soon get enquiries. How you handle this can either secure a sale or turn potential buyers away.
Our recommendation is that you interview them as much as they will be interviewing you. Talk in general terms and don’t give too much in the beginning, don’t tell them the name of your business or the address until they have signed a confidentiality agreement.
A confidentiality agreement is a document that buyers usually have to sign (particularly through a professional business broker) if they wish to receive the profile. This is one way of ascertaining if the buyer is serious about your business or just trying to get information.
In some circumstances you will receive objections such as “don’t you want to sell your business?” It is suggested that you be firm and explain that you want to know and keep track of who has your information. If they don’t wish to sign this document there is a fair chance that they are not serious about buying your business.
You have the right to decide who and under what circumstances your information is disseminated. This is especially crucial if you do not want your staff, competitors or customers to know that you are selling. We develop a confidentiality agreement on your behalf and also provide an outsiders point of view of the key selling points and issues that you may take for granted.
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Marketing your business is critical if you wish to sell it. Remember you can’t sell a secret, so be prepared to invest in finding your last customer.
The newspaper is still the fastest way to get the message out that you are for sale. We recommend that you should allow at least six weeks for newspaper advertising. Monitor the success and change if enquiry levels falls, depending on the business a fair response could be three enquiries per ad.
Ad size should be at least 2 columns wide and at least 3 cms in height. The reason we recommend this size is so that it stands out.
When we read the newspaper most of the “good” businesses appear at the front of the business opportunity section, not in the small classified section at the back. You need your ad to stand out. By investing in this size ad it should demonstrate to buyers that you have a decent business to sell because you can afford to market your business effectively.
The Internet is the most economical medium for selling a business.
In addition to newspaper advertising you can advertise your business for sale on the internet. You still need to achieve exposure for your business.
Most sellers do not recognise how important this element of the process is, we suggest the following -
- Make sure the business is well presented
- Make sure there is no paint peeling off the walls and that they are clean
- Make sure the floors are clean
- Make sure that all equipment is in working order
- Remove anything that is not included in the sale
- Organise multiple site inspections for the same day
- Advise buyers that they have one hour until the next buyer arrives
- Answer questions in a succinct, direct fashion
- Make sure you have a copy of the profile with you during the inspection
- Sell the attributes of the business
- Do not misrepresent your business
Plus much more -
If you are not comfortable with this process we recommend asking your solicitor or accountant to act as a buffer during this phase. If you are comfortable undertaking negotiations you probably don’t require a great deal of assistance. If however you would like to try for yourself, we suggest the following -
- Don’t misrepresent your business
- Be realistic about your price
- Be informed about comparable sales
- Be ready to address any objections about your price calmly and objectively
- Leave room for a little negotiation – everyone wants to feel as though they have won something
- Don’t make comments on how desperate you are about selling
- Don’t indicate what your bottom line is until all offers are in
Plus many other items -
The most important issue that we can convey is to be careful with your answers, the buyers will ask probing questions to ascertain why you are selling and how desperate you are so that they can negotiate you down.
The following is by no means legal advice, you should consult your solicitor before making any decisions. When you negotiate a contract it can be subject to a list of conditions, you should be clear as to what is acceptable to you and what is not before accepting the offer.
Contracts can be subject to -
Financial due diligence
- Plant and equipment due diligence
- Transfer of lease if appropriate
- A new lease if appropriate
- Finance
- Training
- A trial period
- Restraint of trade
Plus many other conditions -
Ask for a deposit, in most cases the deposit is fully refundable if the contract comes to an end before the contract becomes unconditional. After the contract becomes unconditional if the buyer fails to complete the contract they will usually forfeit the deposit paid. You should discuss all the above issues with your solicitor.
The following is what forms the basis of our services when you are ready to sell your business -
Ongoing telephone and email support throughout the sales process
As part of our service we will provide you with a market appraisal on the potential sale price of your business. Ultimately it will be up to you.
We will work with and guide you through the process of preparing your business for sale. This will include but not limited to buyer expectation, presentation of premises, balance sheet analysis and much more.
During the process of selling your business you are going to need to present documentation to potential buyers. Our knowledge and experience will guide you through what is required and in some cases protect you from buyers who want to know how your business operates without actually purchasing.
We design a questionnaire detailing relevant information specific to your business so that it may be presented in a professional profile or memorandum of information. This requires your input (usually only takes a couple of hours) and will ask questions that buyers are sure to ask throughout the process.
We undertake research on your local area and industry to include in the profile to give potential buyers a better perspective on the environment in which your business operates. This may also include industry statistics or trends, local government contacts and other relevant information designed to educate the buyer and convince them that your business is worth purchasing above your competitor's.
Once all the information has been collated, we write a profile giving you the best chance to optimise your sales price. This document not only satisfies the buyer’s expectations but it also provides the insight to your business that a buyer's accountant, solicitor or financier will require. This is a powerful document and is crucial to the process; it acts as a brochure for what will ultimately be your last customer.
In addition to our website we can suggest pay per click campaigns that will assist in generating additional exposure for your business. The more you expose your business the better chance you will have of achieving a sale. Internet marketing is about keywords, you can spend a fortune on sites that don't produce we can manage this process for you.
In the marketing package we send, you will receive suggested ads for newspaper placements. They will focus on ensuring that your advertisement is placed towards the front of the business opportunity or business for sale section of your local paper. The ad will also reflect the attributes of your business - key selling points.
Once marketing has started your business hopefully we will receive buyer enquiries. Our confidentiality agreement will endeavour to protect your information as best as possible. This is one way of ascertaining if buyers are interested in your business or if they are tyre kickers. If they want your information they will have to sign this document. This is part of the qualifying process. We will also provide you a ledger so that you can record all buyers activities.
We will provide you with buyer management strategies to maximise your opportunities for a successful sale.
We will provide you a site inspection strategy to enhance the sales process and to optimise your sale price, strengthening your negotiation position.
We will provide you with negotiation strategies.
We will provide a list of usual contract conditions and situations. Ultimately you decide on what terms you want to sell on but in some cases sellers can be a bit unreasonable, so can buyers, but we don't work for the buyer. You should always discuss this element with your legal advisors.
