Selling your Business



The Decision to Sell Your Business
Whatever the reason that prompted you, selling your business is a very important decision to make. This decision is a final call, so while you may be better off financially (from the cash from the sale), as well as personally, (more time for yourself and your family) do nevertheless consider the big disadvantage of no longer having an ongoing income stream.

Many businesses involve members of the family. For many it would have been part and parcel of their lives. For many it would have been a great source of joy and satisfaction, especially where the business had been running profitably. Many issues have to be taken into account in that final decision.


The 3 Main Points when Selling
There are 3 major questions that need to be spelled out when you are selling a business because an astute potential buyer will also ask them.

These are:

  1. Why is your business for sale?
  2. How much is your business worth?
  3. How will the sale be finalised.


Dos and Don’ts for the Sale
Here are a list of the dos and don’ts:

Dos

  • Do talk to your advisers. Don’t make any moves toward selling until you have talked with your accountant and possibly your lawyer, in case they see things you need to address before putting the business on the market.

  • Do have good systems and records. The sale of your business will be helped if your systems and records are clean and accurate. A new owner needs to see that things have been conducted professionally, and that your records show the true position of your business.

  • Do make sure you take your time. It may take some time for the business to sell, so be prepared for the possibility that it will take some months, or even years, before a qualified buyer is able to take over from you.

  • Do make sure all your financials are accurate. Make sure your accountant has completed all the financial results for you, right up to date, because these will be required for the buyer’s accountant

  • Do keep everything secret. It’s important that you retain confidentiality when selling the business. Especially with staff and customers, because you don’t want to lose staff and you don’t want customer to go elsewhere when they hear the business is going to change hands.

  • Do keep your key staff informed. You may need to talk to your managers and tell them what’s happening in the business. They need to be assured that their jobs are secure. They won’t mind if you are selling the business for good reasons especially if their jobs are secure with the new owner.

  • Do set up an information memorandum. You will need to put together an information memorandum, which is a profile of the business. Your profile will include all the information that a potential buyer needs to have, in order to arrive at a decision.
  • Do retain a positive attitude. You need to be upbeat and positive at all times when negotiating with a buyer. If the buyer gets the idea that you are negative about the business operation this will feed through and they may lose confidence or interest in your venture.

  • Do offer vendor finance. If possible offer vendor finance as this will assist buyers in the short term – they won’t need as much on hand to complete the sale.

Don’ts

  • Don’t go for too high a price. Make sure your asking price is fair, based on the profitability of the business as well as its assets and goodwill.

  • Don’t sell at the wrong time. The best time to sell your business is when it is running well and running profitably. You want buyers to inspect your business when it is at its best.

  • Don’t get unnecessary valuations. In general, a valuation from a professional Valuer is not necessary. This can cost you a lot of money and the figures arrived at may be far away from the real value of your business. An appraisal from an experienced business broker will probably be closer to a fair value. Ask your Accountant to come up with a realistic figure as well.

  • Don’t forget to be “upfront”. It’s no use hiding aspects of the business that you don’t want prospective buyers to see. Being totally honest and pointing out things that need attention will weigh in your favour. It creates trust and confidence. Buyers give you high marks for not hiding things.

  • Don’t sign anything before your lawyer sees it. If a broker or a buyer puts a contract before you, make sure it is referred to your legal adviser before you sign it.

  • Don’t forget to get everything confirmed. In your dealings have everything confirmed in writing. Sometimes representations made orally are relied on, and then you may be accused of saying something at a later date that you did not say at all. Try to keep everything in writing so if anything is given orally, confirm in writing later.

  • Don’t appear too anxious to sell. Play a little hard to get if you can. Don’t appear too anxious to sell. In this way you should be able to negotiate a higher price than if the buyer sees that you want to sell at all cost.