Best housekeeping tips to prepare your business for sale
Sellers can be confronted with buyers who one minute seem interested in their business for sale and the next, go stone cold. Our experience suggests that sometimes the fastest way to deflate a buyer’s enthusiasm, is simple house keeping. Selling your business is probably the biggest sale you’ll ever make and it’s important that we prepare our business for sale just like we would when putting our property on the market.
MAINTAIN UP-TO-DATE FINANCIAL INFORMATION
Buyers like to see up-to-date data usually no more two months old so it’s good practice to keep on top of your financials including records of your sales pipeline, debtors and creditors. This will show a buyer how your current and future trading is likely to pan out and whether the sale of your business has affected anything. It will also reflect on how you manage your business. Accurate and up-to-date information indicates that you are running a smooth operation and makes a buyer feel more confident in being able to step in without having to tidy up first.
MAINTAINING PRODUCTIVITY AND NORMAL BUSINESS HOURS
Prospects must see your business at its best and most productive. There is a tendency for some sellers to lose focus or wind back their operations when they have their business for sale. Buyers need to see that your business is busy, making money, and generally moving forward. They aren’t likely to want a business that is losing income, its competitive advantage or any of the things that attracted them to the business in the first place. It’s extremely important that you continue to run your business with growth in mind and make the most of your decisions based on the best interest of the long-term objectives of the your business; as if it weren’t for sale. Buyers are more likely to scramble over themselves to buy your business and where there’s competition, there tends to be a bidding war for your business for sale! Don’t forget to keep your normal operating hours.
Our experience suggests that confidentiality can achieve a much better result when selling a business. Avoid telling anyone that your business is for sale. Key employees might leave reducing productivity and perceived value to a prospective buyer. Employee theft may occur. Suppliers might lose confidence and go to someone else. Competitors can use this information against you. Customers may leave and sales will drop. You need to protect your image and confidentiality is important in building the image value of your business to prospective buyers for your business.
Just like preparing your property for open homes, look at cost effective ways to dress up and organise your business without over capitalising. Repair signs, replace lights, clean the premises, remove dust (including dust on stock), organise and label things, remove clutter, dress up your presentation and know where everything is (including your financials) in case you need to quickly access or point out anything. Your business must look its best and any negative features need to be eliminated before an inspection.
Unless advised otherwise, you should maintain your inventory at a normal level, keep it fresh, clean and properly displayed. If possible, remove any items that aren’t included in the sale of your business.
No one knows your business better than you do, so if using a broker and where indicated by your business broker, please help in physically showing your operation. Answer the buyer’s questions and be prepared to discuss the day-to-day operation. Ask your business broker advice on how best to conduct yourself and respond to questions. DO NOT discuss the purchase price or terms; defer these questions to your broker. Tell the prospect, “My Broker knows what I am asking and the terms I want. He/she will discuss them with you after our meeting”. DO NOT meet with the prospect without your Broker present as this can put you in a compromising position. Business brokers are bound by Australian legislation and the PAMD Act to work in the best interest of their clients and achieve the maximum sale price for their business. Their job is to get you the best deal and you need to put faith in your broker.
Buyer inspections should be conducted by appointment and conducted at an appropriate time when you can give them your full attention, control what they see and who they speak with. Try to organise the inspection at a time when the business can be seen in its most attractive light. This may not always be possible especially without staff and customers to keep the business looking busy. Try to be clever with your reasons why you have a visitor in the premises. Buyers turning up unannounced can usually be an effort to catch you off guard and “back door” the process when using a business broker. In any case, it is usually an attempt to drive your price down. If a buyer turns up unannounced, tell the buyer that employees do not know that your business is for sale and you will be happy to meet with the buyer at a more convenient time. Be polite, but forceful about this point as you show them to the door.
OFFERS TO BUY YOUR BUSINESS
Experienced buyers will usually make low initial offers to ensure that they are going to get the best possible price and terms. Do not feel insulted by low offers; this is just a starting point. The prospect that makes a low offer may be the prospect that eventually buys your business. Follow the market and listen to advice given to you by your business broker (if you’re using one). They will know what businesses are selling for and have feedback from buyers who are considering your business amongst others they have seen. Start to think about what price you’re prepared to sell your business for and if that price is not out there, think about whether you’re prepared to spend anymore time and money on your campaign to sell your business.
BE PREPARED TO CLOSE QUICKLY
Once an agreement is reached between buyer and seller, buyers generally want to settle as soon as possible and you should be prepared to close quickly too. Key staff, customers and competitors can react in different ways when they hear your business is for sale or under contract. The sooner the new owner takes over, the sooner some of these fears and anxieties will go away and the less impact the sale of your business has on your business itself. If there are actions that you have deferred such as, maintenance or repairs, you should take care of them at once. There will be a lot to do as settlement approaches so everything that can be done in advance of your business sale should be done now.
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