Tips for Sellers
10 Tips to help you sell your business
1. Don’t try to sell it yourself
Sell your business at arm’s length using reputable, licensed business brokers who, like us, are members of the Australian Institute of Business Brokers.
Not only will we only put forward suitable, fully qualified buyers who are able to complete the transaction and handle all of their enquiries, we will also manage all the myriad and specialised details of the sales process. This will save you an enormous amount of time.
2. Produce the full financials from your accountant, not from your own computer
No serious buyer will accept anything other than accountant’s figures, and we are only going to bring you serious, qualified buyers.
If the time of selling is well past the end of financial year, you will need to supply YTD figures. If you don’t supply them the sale will stagnate.
If you are reluctant to provide tax returns because they contain private financial details; first, we ensure the prospective buyer always signs a binding confidentiality agreement and, second; we will put both parties’ accountants together on the basis that information in the tax returns is confidential to the vendor and is for the purchaser’s accountant’s eyes only.
3. Provide a complete and up-to-date list of Plant & Equipment
This is required with as much detail as possible, ie, item, description, serial number, values not needed.
4. Price the business correctly – neither under-valued nor over-valued
As always, the market rules, no matter whether you’re selling a house, a car or a business. The value is what a ready, willing and able buyer is prepared to pay.
Unfortunately there are no Government records of business sales, so there is no way of making price comparisons from official historical data and accountants really only value businesses using text book methods.
However, our own benchmarking data-base is so large and complete that we can show you exactly what almost any given size and type of business is really worth.
Also, a purchaser will be prepared to pay more if they see your business as ‘low risk’. In this case they will accept a lower rate of return from the investment than if it is seen as ‘high risk’.
Remember, it’s in our best interests to achieve you the best price for the business, but to also get you a quick, clean sale.
5. Be aware of the potential of the business
This could be in the form of anticipated market growth, untapped markets, introduction of new technology, acquisition of competitors, divestment etc.
Be able to point these out to the prospective buyer. Though these factors may not increase the actual sale price of the business in strict dollar terms, they never-the-less underpin the sale and give the purchaser more security in making his decision.
6. Tell the staff or not?
Nearly all buyers of businesses are keen to retain the staff and often insist on a special condition in the contract stipulating that the staff remains with the business after they take over. The staff knows the way the business works inside out; they know all the customers, the suppliers and how the systems work, so why would a buyer want to lose them?
Tell the staff this fact to calm their concerns
We find it’s best to explain at the next staff meeting that you’ve decided to ‘test the market’ and you’ve quietly listed the business for sale with us to see what happens, but that everything else will remain ‘as is’.
We agree in some cases the staff shouldn’t be told until after exchange of contracts.
Not all businesses are the same, so what works for one may not necessarily work for another.
We can advise on the best course of action.
7. Smarten it up
We always sell a well-presented business faster, and we get more money for it too!
We always get more for restaurants that have shiny kitchens. We always get more for a business that’s well presented and looks smart, prosperous and tidy.
Paint it if necessary. Clean up the signage and the vehicles. Clean the furniture. Clean the windows. Have the carpets cleaned. Clean up the yard or storeroom and get rid of the rubbish. Do any gardens. Tidy up. You’ll be amazed at the increased level of response and interest because it’s these little things that make the business look efficient, well run and profitable.
8. Be prepared to spend the money to promote it. It’s hard to sell a secret
90% of all businesses we sell go to buyers who have seen our advertisments. Remember, qualified buyers check the ‘Business Opportunities’ every day or week religiously. If you’re not listed, you may miss the perfect opportunity.
9. Don’t give up
Some businesses are harder to sell than others, usually because they require highly specific skills to run them; florists, interior decorators, restaurants, car servicing and electrical servicing businesses are good examples.
However, when a qualified buyer does show up, the decision is generally fast and the price is right. It can happen in a flash.
10. Always, always tell the truth
We have seen sales that were absolute certainties fall over because the vendor tried to ‘gild the lily’. If a serious buyer finds out that one thing has been told to him incorrectly, he’ll assume there’s more or worse also hidden and will back away.