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
Tip 3. How to protect your information
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.
Tip 4. How to marketing your business for sale
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.
Tip 5. How to undertake a site inspection
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 -
Tip 6. How to negotiate the best price
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.
Tip 7. How to understand the contract process
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.
