Most business owners sometimes become confused about what their business is actually worth. In real terms a business is worth what a buyer is prepared to pay. To achieve the best sale outcome a business must be:
- Market priced - Prepared for sale - Openly promoted to the available marketplace - Represented by professional and experienced professionals
The following is offered by one of our respected, qualified and experienced business brokers.
Created and written by Gary Johnston
Most business owners plan to exit the business after say 3 -5 years in theory the correct strategy of “When to Sell” should be outlined in your business plan, but in reality its when the market place is prepared to buy at a price that your prepared to accept, or its simply time to move on – for one reason or another!
The important points to remember are as follows:
Price the business to attract and secure a buyer within a reasonable time period
Prepare the business for sale - ensure your past and current financials are available for inspection and present your premises in an attractive and streamlined manner
Contract the services of a qualified and experienced professional business broker to assist you in the preparation and selling processes
Be prepared to financially expose your business to the marketplace, an experienced business broker will have a database of buyers and may be able to secure a buyer to keep your marketing costs at a low level
Q & A
Q. Is there a better time to sell? A. No, any time is a good time, although the market is generally quiet over the post and pre Christmas period, - having said this many contracts have been signed off on Christmas Eve.
Q. Why do I have to pay for advertising? A. Not all businesses have to be advertised to attract a buyer / sale. But advertising is usually required in one form or another and these outlays are generally the owner’s responsibility. The marketing of your business is a partnership between the broker and the owner – together a result will be gained. The broker has a myriad of duties and responsibilities all of which attract costs and these costs are generally borne by the broker. Most brokers are paid on a sales performance basis, and as such only receive their fees upon the successful completion of sale, in the meantime expenses such as secretarial, office, phone, postage, ISP, stationery, insurance etc etc are all the broker's responsibilities.
Q. What are buyers looking for in a business acquisition?
A. The buyer’s priorities are as follows:
Security of their funds
Return on Investment
Lifestyle privlidges of the business
Competition / Survival
Previous experience in the industry
Exit strategy
Personnel requirements
How important is the current owner to the ongoing success of the business
Can it be operated partially or totally by personnel
Cash flow and future capital investment requirements
…………to say the least
Q. How long will it take to sell?
A. Generally speaking, an experienced Broker will have prospective buyers on his or her database. Those buyers already have an established a relationship with the Broker and have decided that they want to do business with this person, - and this is an important factor in the selling process. A bond of trust must be developed between the 3 parties - owner, buyer and the Broker.
Otherwise, a time period of say 6 -8 weeks should allow enough time to obtain feed back from the broker and the marketplace to determine your overall chances of success.
Q. Why can’t I sell the business myself?
A. Well yes you can, but selling a business requires a lot of extra work and
normally countless hours of preparation, discussions and attendance of meetings. The business owner’s role is to successfully manage and operate the business; can you take on the role of being a Business Broker as well? –
Generally speaking there’s just not enough hours in the day!
Furthermore, do you have a buyer base, relationships with Accountants,lawyers or media groups? – No.
The most important fact is simply – Most Buyers prefer to do business thru an intermediatory. Generally speaking Buyers are prepared to literally spend hours and hours discussing your business and its intellectual property with you and then just walk away, - your broker is a trained sales consultant who can qualify the buyer before you waste valuable time and of most importance divulge confidential information.
Q. Can I advertise my business directly on the Internet myself? A. Yes, on some sites you can advertise directly. But on the high ranking sites the cost can be prohibitive, - a Broker usually has an ongoing contract with the high ranking web site owners and as such the cost to advertise is lower. Some of these sites are industry selective - whereby members of the public cannot gain access anyway.
Q. Selecting the right Business Broker A. Sometimes this can be a daunting job! It’s just like anything else.
Selecting the right person can be difficult, therefore interview 2 - 3 brokers and openly discuss your requirements with them. It’s similar to personnel recruitment, it’s nice to get it right first time around but it doesn’t always work out that way. I suppose you can also say that about selecting an Accountant, Lawyer and or banker – the right selection can be difficult at times but is a very important factor that cannot be overlooked.
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