7. Closing Stage

2. Sell the Business

Prepare the Business for Sale
Prepare your business before you put it on the market. As soon as the business is on the market there may be intense interest in it and you will have little time to make any other improvements you thought necessary.

Preparing a business is like preparing a car. You have to clean it out, tidy it up and present it in the most attractive way to a potential buyer. In preparing a business, you need to gather together all the information a potential buyer may want and have answers ready for all the questions they will probably ask.

Get Professional Help
You should not sell your business until you have discussed it with your accountant and possibly your solicitor. Your accountant will need to complete up to date financial accounts and he/she will also have to put together financial information that needs to be revealed to the potential buyer.

Your accountant can also assist in arriving at a fair value for the business. Your accountant will also need to liaise with the buyer’s accountant on other matters, so the sooner your accountant knows the situation the better preparation there will be.

You may have to talk to your lawyer to sort out any legal issues involved. These could include existing contracts, lease agreements and any franchise agreements, etc. Your accountant can also look at your franchise agreement, contracts on hand, lease of premises agreement, etc, to make sure there are no “fishhooks” that would make it difficult for a buyer to complete a deal.

Therefore, the 3 main parties involved in selling a business are your accountant, your lawyer and possibly your business broker.

Prepare Financial Information
The financial results will be the main interest for the buyer. The buyer is interested in taking over a business that will create a profit. The bottom line for them, is – what profit is the business making? Your accountant will have to complete up to date financial statements to show not only the profit of the business, but also the assets and liabilities in the balance sheet, as well as the cash flow statements.

Your accountant should make sure that all taxation returns and Sales Tax returns are up to date so that there is a clean passing over of the business to the new owner.

Make sure you have all the answers for questions regarding the financial history of the business, as well as the transactions that have gone on before and the current position on, many areas.

Critical Issues When Selling a Business
Some of the issues that will be involved in the sale

  1. Finding a buyer. There are a number of options available to you when looking for a buyer for your business.

  2. Business Brokers. A business Broker is a professional who can handle the sale of your business. They usually have a portfolio of other businesses they are selling, as well as potential buyers. They act on your behalf, bringing you and the buyer together and then assist in the process of negotiation, to finalise a deal.

  3. Customers. A potential buyer is a customer who buys products from you. It may offer that customer a new opportunity in an area he/she is already involved in.

  4. Competitors. You may find that your business has taken some of the market share away from a competitor. They may be interested in taking over your business, in order to increase their share.

  5. Employees. Some of the best prospect may be right under your nose. They may be your business partners or staff. If you have been running the business with others, then these people may be likely candidates, interested in taking over. Your managers may be in a position where they would be happy to take over the business because they know how everything runs and are familiar with all areas.

  6. What is your business worth? Determining how much your business is worth is one of those complex areas that may need the help of an accountant. The accountant will try to establish the value of the business based on its financial records. At the end of the day, the value will be that which is arrived at by negotiation with a potential buyer.

  7. Arriving at goodwill value. The goodwill value is an intangible thing that is hard to put a value on. The goodwill is tied up with the reputation of the business and the relationship that it has with customers, suppliers and the community in general. It is to do with the image and reputation of the business, which causes people to come and buy there, rather than somewhere else. The fact that the owner has established a customer database, as well as buying patterns and payment history, and has promoted the business – all come into the mix as far as calculating goodwill is concerned.


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