Preparing for the Sale of your Business

We often get business owners asking us what our advice to owners contemplating the sale of their business would be, our answer invariably is PREPARATION.

Any exercise in preparing a business must be OUTWARD LOOKING. The vast majority of these exercises focus on the internal health and profitability of the business, which is all very well but it makes a huge assumption that that is what a potential purchaser (and moreover a strategic potential purchaser – the ones who pay the best price), cares about. This is not necessarily so.

Here are the four questions to ask yourself about the potential purchaser (it goes without saying that you know how to tidy up your accounting records, tax affairs and profitability):

1) How will they value a business like yours, in your sector?

It is important to maximise every aspect of your business that the potential purchaser is likely to measure. For example, if they are likely to offer you a multiple of your turnover then that is where you need to ensure you have reached your maximum potential. If however they are measuring you on market share then that is where you need to focus your preparation pre-sale.

2) What niches have the most potential purchasers paying the best prices?

Establish how you can select and then dominate your niche market well in advance of offering your business for sale. Do the groundwork first and find out what niches potential purchases are finding desirable and focus on that, as those are the businesses that they will pay premium rates for. Establishing the right area and working on that will ‘groom’ your business and increase its ‘saleability’.

3) What is the basis behind the mergers and acquisitions strategy of potential purchasers and what problems are they trying to solve?

Find out which businesses are being bought up and why as this will inevitably prepare you better for the negotiations process. Understanding why purchasers are buying businesses means that you can present the acquisition of your business as the solution to their problem and/or just what they have been searching for.

4) Is the management team in your business likely to be important to a potential purchaser?

When planning the sale of your business you are probably looking forward to not working there yourself, which means that you need to present a management team already in place who can run the business after you have gone. This will increase its desirability to any potential purchasers as they can be confident that productivity and profitability will not dip just because you are not there. It is important that they are working efficiently and happily prior to the sale, and if possible try to ascertain (in advance of any announcements to staff about the sale of the business) whether or not the potential purchasers are looking to hire all existing staff or are they likely to change the management team. This information will help you greatly in the preparation for sale.

The overriding theme of all of the above points is KNOWLEDGE AND UNDERSTANDING. Potential purchasers will welcome the preparation that you have put in to grooming your business ready for sale.

If you are thinking of planning your own exit strategy then please contact us now to discuss it. We have many contacts and advisers that we can put you in touch with who will help you fulfil all of the above criteria and ultimately aid the sale of your business.