Even though you may be ready to sell, your business may not be.
Now is the time to review systems, update customer records, products, suppliers, equipment, leases, employee contracts. etc.
Do the necessary planning now to maximize the value of your business later.
Avoid disappointment and anticipate delays.
Selling A Business Can Take Time. For some businesses, it can take months to find a motivated, qualified buyer. Use your time wisely and continue to invest in your business as you would if you were staying.
Due diligence may raise lots of questions and it may take time to produce satisfactory answers.
Obtaining finance and ironing out the finer details of leasing agreements, etc may also take time.Unfortunately, at some point, the buyer might walk away, and the process begins again. This may happen several times before a sale is made. Patience is the key.
Are you able to sell the business?
Other shareholders who have an interest in the business may need to be consulted before going to market.
There may be a right of first refusal for a minority shareholder, or other provisions in a franchise agreement. Timing issues may also need to be factored in.
Update Technology to improve Saleability.
To keep up with competition and industry standards, it may be wise to invest in technology.
You may be fine with the way it is, but when it comes time to sell, buyers may be put off if the technology is too outdated.
Does The Cash Flow Justify The Price?
Unless the sale is emotionally driven, Buyers will usually only settle on a business when it makes financial sense. If not, why take the risk when they could take another opportunity which would not require any financial investment? Ie. A job.
There are a few ways to make that justification, but in general terms, does the business make enough money to cover its debts, pay a salary to the owner, and provide a healthy return on investment? If not, most advisors would suggest they walk away.
Why Use A Professional Broker?
Selling a business can be a complicated process because of all of the many elements to a business – location, leases, equipment, employees, receivables, payables, etc.
The price of a business is obviously important, but so too are the terms – how and when the payments are made can have ramifications long after the closing.
Understanding “Add Backs.”
Determining the “Add Backs” – expenses that are added to the profits to derive EBITDA (earnings before interest, taxes, depreciation and amortization) or SDE (Sellers Discretionary Earnings – used for smaller businesses).
Legitimate ‘Add Backs’ for a business vary depending on the nature of the business. However, personal use of a car, phone and computer are common. If working in the business, an owners wage must be accounted for, but if it is over market rate, a portion of this may count as an add back.
Is the business High Risk?
If a substantial portion of the company’s revenue is reliant on one or two large customers or suppliers, there is a risk that should one of those leave after the sale closes, the Buyer is not getting the company’s present value. You as the business Seller may need to diversify now to minimize the risk should this be a factor.
Clean Up The Financials!
Messy figures raise concerns.
Make sure everything is up to date and easily accessible.
Having accountant’s figures is a must. Good or bad, the buyer needs to see exactly what position the business is in and what has been submitted to the ATO. Do not have the accountant do the addbacks for you. This is something that should be shown separately.