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If you are thinking of selling your business then it makes sense to present it in a way that will make it be more attractive to potential buyers, thereby maximising it’s value. If time is a luxury that you have prior to putting your business on the market, then use it wisely and prepare well for the future sale.
First impressions count, so if any area of your business premises is looking neglected, now is the time to sharpen it up and re-paint or redecorate as required. This includes cleaning plant and checking any outstanding maintenance work is carried out.
Sell or dispose of any obsolete assets and stock that are not essential to the running of the business. This helps keep the sale price down and provides a return on dated or surplus stock or redundant equipment. Compile a comprehensive list of plant and equipment that is part of the sale. Also don’t forget to tidy your customer databases, formalise any verbal agreements or contracts, and detail systems and procedures to increase the value of intangibles. Perhaps the most important aspect in attracting quality buyers is having a good set of accounts.
Ensure your accounting and bookkeeping are up to date as buyers may need to satisfy lenders that they can support their living commitments, as well as service any loan from the business’s earnings. Most banks like to examine three year’s previous financial history to satisfy their requirement.
Traditionally buyers usually look first to the bottom line and if what they see interests them, then they work their way back up through the accounts. Ideally the bottom line needs to look good and reflect a healthy business, or at least reflect the potential for future profit making.
Although cashflow and profitability are important to buyers, there are also other aspects that will be of interest. Buyers are often seeking release from a 9-5 job and the freedom of managing their own destiny. Varying aspects of your business will appeal to different buyers, and there will be buyers out there wanting to research and compare the options prior to making any offer.
Training or transition periods can help. Your buyer may have never owned a business before and could be anxious about getting into your industry. Consider providing training to ease the transition and use this as a trade-off against concessions that are more valuable to you. Understanding your buyer’s needs is important in determining how best to pitch your business around what is important to you and the buyer, and what is needed to make the sale happen.
Absoluely agree with all your comments. As a specialist Buiness Broker in the Hospitality sector I work with many business owners. There are those that are well organised and understand the need to prepare a business for sale. These owners usually get a better price and sell sooner. There are also some owners that make no effort to present their buiness in it's best light.
Anyone interested in advice on (sometimes) small things that can be done to prepare a business for sale could take a look at my blog entries on this subject at Hospitality Business Broker on realestate.co.nz