It is a common miss-perception that most businesses that are for sale are poor performers in the market! Most businesses sold through a business broker are good, profit making and well established businesses. Under the Real Estate Act, business buyers are well protected and agents face huge fines for non-disclosure if misconduct or misrepresentation is proven.
While it doesn’t always seem that the reason for selling is important to Vendors, it is often the first question asked for by a Purchaser. The reason itself can make the difference of how a business is viewed and often can provide confidence to a Purchaser to go ahead or dismiss the business for sale.
Your reason for selling would be specific and unique to you, but I have listed a couple of the most common reasons;
#1 Retirement is the obvious reason. Freeing up capital for retirement becomes a big driver now the house prices (particular in Auckland spiraling out of control) and renting becomes unaffordable for a large group of people, elderly being one of them.
Until now it was an option to retire early for a lot of baby boomers, and most importantly; it was a choice! Over the next few years you will see businesses run by babyboomers coming to market because they have to, due to their age. That makes NOW a good time to think about your exit strategy! Certainly if your business need some systems in order to improve the productivity, but you are not committed to make the investments, you should think about selling sooner rather than later. In my blog “times are Changing..” you can read more.
#2 Divest. Your business might be the most valuable asset you own. This is a great testament to all your hard work – but it also means that most of your cash is tied up in the business. Most financial advisers would tell you that you should spread the risk in order to protect yourself. The only thing to consider is that another investment doesn’t return the same income. But that is how it seems to work with investments; high returns = high risk
#3 You have reached your potential. It takes a brave person to realise that your company has outgrown you, as an owner. Though in some cases, when a business start-up went through its initial stage there is a point the business needs more skill, more resources and more capital investment to take it to the next level.
Realising this, it is important to have a written business plan that outlines your objectives to meet and then plan your exit to maximise the potential of your business. You could upskill, employ business coaches and expensive other strategies. If you are committed to that it is worth hanging in there, if you are not ready to make that commitment to invest in yourself and the companies’ growth it is inevitable to have a, well planned exit strategy.
#4 Poor performance.If your business isn’t performing well, you may be tempted to sell it. I would suggest to ‘hang in there’! It is better to try to turn your business around rather than waste all of the hard work, time and money that you have invested by selling it for a lesser value. When you finally come to sell, you’ll benefit from a greater goodwill value and get a better price.
If your business is making a profit, then it will have a value. In fact even if your business isn’t making a profit it may still have a value – if it has potential!
If we liken the value of your business to chips in a casino, you can’t actually use the value of the chips until it is converted into cashed. Although your company may generate a tangible profit each year, to release the value of your business you have to cash in your chips and sell up.
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- FREE Download; Must-Have GUIDE to a successful Restaurant Business!
- FREE Download; Buying a Business
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