Stuff Happens – it pays to be "Business Sale Ready"

“The only constant in life is change”, as the Greek philosopher Heraclitus put it. Our environment, health, relationships and life stages all change - that’s how it is with business.  We have all witnessed how a pandemic can come along and quickly turn things upside down.

In New Zealand we have a large number of small businesses. Some of these business owners will be wanting to cash out, change their lifestyle or retire from business now, or in the next few years. Some owners will be strapped for cash, some will be tired and not able to adapt - others will be looking for a change in direction, or be considering retirement.

As business owners seek to exit their businesses, a smaller, and sometimes younger and more selective group of buyers will be looking to invest.

“Unfortunately, an over-supply of struggling or average businesses is likely to result in some failing to sell. Being prepared in advance is your best way to sell your business and secure your financial future” says Richard O’Brien from the NZ businesses for sale website nzbizbuysell.

If cashing up and selling your business is something you are considering, there are some important elements that need to be added to your business plan to help you sell and achieve your best outcome.

Ideally you will have a business exit strategy. Some owners may be unsure about how to prepare a business exit plan - in this case it is best to engage professional help. Having an exit strategy in place as part of your business plan is an investment in your business - this way your business’s value is maximised. There are also short term benefits in streamlining your business, generating more sales and cash flow, and lessening the reliance on you. This allows you to be “business sale ready” at any time and for whatever reason. Keep in mind that one of the major goals in business is to increase the value and saleability of your business. This in turn gives increases the value of your asset.

If this isn’t possible, focus on the things that add the most value. Business buyers appreciate good cash flow, sound systems and processes, and a business with a future. It may be that you need to reposition your business, focus on a different market, or change your business model. These strategies can help your business, and help you get a better sale

Planning is important - preparing your business for sale is an important priority.  Increase your business’s desirability by identifying what potential buyers want. Address any areas that leak value and are likely to be used to negotiate the price down. Ensure all procedures and systems are properly documented. Improve cash flow by boosting your sales and minimising expenses. Go through your financial records and ensure they reflect a healthy turnover and profit margin. You will ideally have an established client base with opportunity for diversification and future growth.

Make sure the business can operate independently of you. Client dependence on the current owner can diminish the confidence of potential buyers, as clients or customers may not remain loyal once you gone.

It can take time to sell your business. Download or make a Business Sellers’ Checklist for what you need included in your business plan, so you get the very best sale and price.

Cover-ups often lead to distrust and the buyer bailing, so always remember to be upfront, realistic and honest when dealing with a potential buyer.