How to sell a business

Once you have decided to sell your business, plan it well.

Selling a business will be one of the most important things you'll do, and you only get one chance to get it right. If one of your objectives in selling your business is to get the best price, you need to consider who the likely buyer may be, then have strategies to target this group. It is important to manage this process and the disclosure of information. By managing the marketing process you can maximise your exposure while maintaining confidentiality. If you want to sell a business, and want a good price, you will need to tell buyers you have a business for sale! However, one or two mismanaged ads will only expose your business to a small percent of the buyer pool - and could well alert your employees, customers and suppliers that the business is up for sale. Key employees might jump ship, others might stop putting in the effort, suppliers might search for other customers, and your customers might search for other sources.

If you make an effort to understand the steps in selling and who your likely buyer may be, then careful planning with the help of a professional advisor will get you well on the way towards negotiating terms and a price that are suitable to you.

Key points to consider when selling your business:

Buyers will be looking for cashflow, and to quantify the value in your business.

Choose experts (experienced professionals) to help you through the process and avoid any pitfalls - legal/ethical or financial.

Valuing your business - determine a realistic price considering your buyer, the condition of your business, and the market. This is generally a job for the experts.

Finding a buyer - Create a marketing plan and an Information Memorandum (you may enlist a business broker to help), to target your potential buyers. Don't just tell the guy next door! You need to manage the process, tell people, and promote your opportunity widely through print, business for sale internet sites and direct mail - after all, you want the best prospects for a successful sale. You might approach competitors or suppliers, or work with a business broker who will list your business for sale and do this work for you.

Prepare for due diligence - Once you have found a buyer that has the money, motivation and skills to buy your business, take time so they get to understand your business, it's value, and how profitable it is now and potentially in the future. Be prepared to produce financial documents (statements and projections) and answer all kinds of probing questions.

Structuring the deal - Identify options as to terms - be it what is being sold, vendor finance, training etc., paying attention to any tax implications. Your accountant and lawyer can help here.

The offer, your sales agreement – Request for all offers in writing on a business sales agreement that clearly and thoroughly covers all aspects of the transaction including: the names of the parties; what’s being sold; purchase price; inventory included in the sale; how the business will be run prior to change over; the transition, any contingencies; non-compete clauses; fees and terms and who is to pay what. Your business broker or lawyer can help here.

Businesses can take some time to sell - influencing factors include price, type, ease of finance and market conditions.

Preparing an Information Memorandum. An important tool that assists in promoting your business for sale is a sales information memorandum. Essentially, this is a business plan in reverse. It should present all the important information about your company, market, products, and industry in a simple format that presents your company in a positive light.

Start with an executive summary that briefly outlines your key selling points. The buyer will always want to know why you are selling, so have an explanation ready. Include sections that outline the facts about your company's history, operations and structure, products, market, historical and projected financial statements, the asking price and basic terms you are looking for. List any physical assets and your employees, together with any other information that explains who you are and why your business is such a strong opportunity. Keep your audience in mind; make sure you don't divulge any information that you wouldn't want your competitors to see.

If problems exist, don't try to cover them up. The buyer will find out eventually and will likely distrust everything you say after that. Instead, briefly state the problem along with one or more possible solutions.

For more information on selling your business visit www.aubizbuysell.com.au

By Richard O'Brien - aubizbuysell
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