Whether you have a business for sale, or you’re just considering your options: read this first!
Selling a business doesn’t happen overnight. It requires planning and determination. Many factors play a role when it comes to the length of the sale process; valuation, the market, the industry and most importantly: how does a buyer view the risk of buying your business.
Planning to Sell Checklist
This website is all about guiding you towards the best outcome possible, in the shortest time frame possible. The first step is probably this checklist, to see how far you are in the process.
Another exercise (before going to market) is to download these KPI’s to ensure you have a healhty cash flow. It identifies potential feedback you will receive on cash flow, paying your bills, the turnaround of your stock and a purchaser’s Return on Investment (ROI). All of these are very important indicators, driving the purchase price of your business up or down.
If you are a little overwhelmed by this stage, call us. We will show you the easiest way. You are not the only one… Either you can keep reading about what factors influence the valuation of your business or read about. What makes your business attractive to a prospective purchaser.
For some business owners there will be a time that they don’t want to sell; they simply have to! The choice might be selling or closing the doors without any financial benefit of what you have been building over the years…
Due to the pressure of baby boomer business owners getting older, more and more businesses will come to market over time, and it could be harder to make your business stand out from the rest of the businesses for sale. Defining your USP (Unique Selling Point or point of difference) could be the difference between selling your business or having a business that you can not sell.
We have only just started to see the first wave of babyboomers hitting their 65 to 70th birthday anniversary and there are a lot more to come! If you are a business owner close to retirement age, ask yourself the following question; How ready is my Business to sell if I were to sell today? (download the free checklist by clicking on this link, no email required)
There are a couple of factors you should look at;
- Market Factors
Most of these factors have to do with the industry you are operating in. They often are beyond your control but could have a significant impact on your valuation because of the risk to a potential buyer.
Examples are; Is your industry growing/declining?; Do you have a lot of competitors? ; Is the industry threatened by technology?
- Individual Business Factors
These factors will have to do with you and the performance of the current management. It will be the single most important factor of how a potential buyer will see your business. It will reflect the risk they [a potential buyer] will take to buy your business, start their own business from scratch (in the same industry) OR purchase a different business in another industry all together…
Examples are; How many years have you been trading?; How loyal is your customer base?; How experienced is your staff/ management?; and what systems and procedures do you have in place to ensure a smooth transition?
- Business Growth Factors
In some cases, even when the business factors are not in your favour, it is possible to get a positive result! This would then depend on how much growth can a potential buyer foresee. They might have access to different markets. Most of the time these are competitors or strategic buyers. You will need a different approach to get to this group of buyers.
Examples are; Could you add on more/ different products or services? Could this model work in other geographical markets? How scalable is growth and could the current management cope with this growth?
- Buyer Risk
This factor will always be the biggest influencer on how a vendor values a business and how much a purchaser is prepared to pay for your business; How transferable is the business knowledge and how many customers would walk away after take-over because of the relationship with the owner.
In my view you should always ensure that you, as an owner, do not become the face of the business! Delegate as much as possible to other staff members so the customer does not rely on you to come to the phone and take an order; therefore the business is not reliable on you as a business owner!
Other examples a buyer would look at are;
- customer spread (are you reliant on 1 or 2 big customers?)
- Are you currently achieving industry benchmark standards?
- supply and demand of your product in the market.
FREE LINK Northland downloads:
FREE Booklet outlining the sales process: Managing The Sale of Your Business
FREE Booklet outlining other options to an Exit Strategy