Selling A Business

How the business is prepared for sale can make or break a positive selling experience. There are so many aspects that must be considered and even then you can be assured other  variables will come into play throughout the process. Without honest and diligent support selling a business can be a confusing, stressful and a difficult process. A qualified and experienced business broker will have seen and managed many difference scenarios and start with the end in mind. This means preparing the business, the marketing, the information memorandums, the confidentiality agreement and process with consideration of the buyer/s, their accountant, their solicitor and banks. Due Diligence is becoming more widely adopted with small to large business sales. Being forewarned is to be fore armed and ready for this crucial part of the process.

Our goal whilst helping you achieve the best selling price is to also ensure we are successful in managing confidentiality and the buyer which helps lead to better terms and conditions. The perfect sale is when both you the seller and the buyer are happy. This ensures a smooth and successful transition period. 

It is important well before you need or want to sell that you have a plan. As we often say start with the end in mind. A planned exit strategy and the process leading up to the sale will ensure that you and your business broker are on the same page and have a planned selling strategy.

Planning and preparation should not be under- estimated. There are so many part of a sale that involve planning, thought and consideration from your final net return, tax considerations and so much more. Working closely with your business broker and accountant is a great place to start.

When you have  considered your options your business broker can work on getting the business ready for sale and then sold.

• Talk with your accountant and get all your financials up to date. Speak to your solicitor and have any leases and agreements ready along with anything else they suggest. Speak with your business broker as they will want to prepare an information memorandum. This step is all about preparing documentation and information so that a buyer can have a quality initial review of what is for sale and establish some value around the opportunity.
• We will prepare many things from marketing scripts and images for all the leading business for sale websites, a confidentiality agreement for the business, the confidential business summary, and the information memorandum. These are all done with our team and your help. When completed we have all of the marketing documents reviewed by you the seller and approved before we commence.
• We manage all buyer enquiry which involves a confidentiality agreement. We qualify buyers to a point where you are seller know enough to feel comfortable. Once we and/or yourself approve the buyer we provide the information memorandum and start working with the buyer to see how we can assist going forward.
• For us as business brokers we are always acting in our seller best interests and this means we must get to know the buyer. If we build repour with the buyer they will lean on us for further help and support and trust our guidance on the process. The alternative is to have the buyer keep all cards close to their chest, not engage with the broker and the process will be a commercial transaction only which is never going to give both parties the best outcome.
• The opportunity to seek an offer, manage the process through to an un-conditional exchange of contracts takes a great deal of experience, skill and care. Make no mistake deals can come un-stuck quicker than not.
• We will work carefully and diligently right up until settlement  making sure the buyer and the seller are transitioning well and enjoy the final steps of the selling process.

This is one of my favourite topics. I often say to sellers when we go through this process that you can have 10 experienced business brokers look at the exact same information on the same business and potentially get several different assessments. This in part comes down to their previous experience with your industry, the current supply and demand for your business, the general economy and also how they chose to appraise or value your business. When a broker has to appraise your business there are so many things that should be taken into account.

One of the first steps is to have the accountant and/or broker normalise the financials. This is a process of assessing any adjustments to the profit and loss trading statement for the current and possibly prior financial years. Adjustments might be for example checking that market rent is the same as the rent expense, checking any and all owners have applied and paid themselves the correct market wages and superannuation (sometimes they pay extra superannuation contributions), assessing any personal or one off expenses etc

Other variables that may affect a business brokers appraisal is the value and quality of assets, the level of stock the business requires, the level of debtors (accounts receivable) the requirement for working capital, work in progress, deposits held, gift vouchers, staff entitlements and liabilities.

Other possible considerations might be how entrenched any owners are in the business, how systemized the business is, how the business wins new business and retains existing clients, the history of the business and its brand. There are so many areas of consideration and that is why you can easily get different opinions about what the business might be worth.

An experienced broker will not tell you what you want to hear. Sellers need to be treated with great respect and that includes the good the bad and the ugly. Pricing a business from our perspective often means we provide a price guide and list usually for the upper end of our guide and advise offers in the range is where we should have a chat and counter offer the buyer.

Over 75% of our sales are at full asking price. Why? We list businesses that represent value and opportunity for the buyer. We know (generally speaking) what return on investment principles and capital requirements are and as we often say start with the end in mind. This thought process means we are more likely to get buyers interested in your business and then have their accountant endorse the business and banks be able to or these days want to fund the buyer.

Any broker can list a business but selling one where both the seller and buyer are happy is an art!

Over the years I have seen the best businesses take 12-15 months to sell and on other occasions business that I thought were very specialised or could be hard to sell, be sold within months.

What you the seller and the broker can do is have a conversation about the business, the current market, competition, and what might be a likely scenario.

I have had on numerous occasions really well prepared and presented businesses with a good return on investment sit on the market for 9-12 months with hardly any enquiry. All of a sudden two good enquiries and both parties make full price offers. This has happened many times. Buyers come and go from the market daily.

I have had buyers on my database be told of a new listing from day 1 but the actual settlement be 6 months later. Why? Delays between information, accountants reports, bank and finance requirements, bank valuations, due diligence etc.

As a very general guide we could say it takes between 6-9 months for a business to sell. There are many examples either side of this.

At the time of writing this I have a $3.9M business exchange un-conditionally yesterday that was on the market just 5 weeks ago. I have another one exchanged un-conditionally last week and the buyer made a full priced offer of $2.2M late January and it is now the first week of June.

Every business and every experience is different. There are so many people and circumstances that need to be managed and this is why an experienced business broker is essential.