10 tips to consider when getting your business ready for a sale

Have you ever watched a television show looking at a home owner struggling to sell their home and wondered aloud how they could possibly have expected to sell when the property clearly wasn’t ready for potential buyers walking through the front door?

Whilst selling a business is very different from selling a house, the basic principle is the same, the seller must be prepared if they want to achieve the best possible price.

Here we set out some of the key steps that should be taken to prepare a private business for a sale.

1. Your business must work without you – remember you’re selling the business and not yourself. Potential buyers will want to see a strong management team capable of running the business in your absence. Step back from the business before you go to sell it and demonstrate to buyers that the business is running successfully in your absence.

    

2. Don’t leave it too late to maximize profits – you need to start thinking about how to maximize your profits before ever deciding to sell your business. Implementing profit increasing initiatives mid sale process will result in you missing the opportunity to enhance value. A proven profitability track record is key to maximising the value of your business.

    

3. Tidy your Balance Sheet – get your spring cleaning done in advance of a sales process. If there are assets on the Balance Sheet that are non-core to the business (e.g. investment property) consider disposing of them and either converting the proceeds to cash or reducing debt.

    

4. Make sure your finance team is match fit – having a good financial controller/finance team is key to ensure strong financial controls are in place. Your finance team will have a key role to play in any due diligence being carried out by a prospective buyer and they can give the right impression from the start. A business that prepares accurate financial statements in a timely manner will often assist in influencing a potential buyer.

    

5. Diversification – a buyer will look for a broad customer base and will want to avoid over reliance on one customer or sector which increases the risk for a potential buyer.

    

6. Sell your vision – take the buyer through your business journey, where the business has come from and your vision as to where the business can go to. Paint a picture as to what the future holds for the business.

    

7. Credibility – don’t provide potential buyers with a pipe dream. You are selling future profits and a buyer must believe that they are reasonable, credible and most importantly of all achievable. Remember that if a buyer doesn’t believe that future profitability is achievable then what else can they buy?

    

8. Family – if your business is a family business then you make need to take the family issues out of the business. Address issues such as a family member employed on a salary substantially in excess of the market salary or a shareholder with a generous expense allowance. Don’t leave it to the buyer to highlight the issue and ask you how you plan on resolving same.

    

9. Cash is King – implement a robust debtor/credit policy to turn your receivables into cash as quickly as possible. A prospective buyer will look positively on a well-run business with little or no debtor problems and the smaller the working capital requirement the better.

    

10. Seek advice – timely advice from the professionals (accounting, tax & legal) is a must. There is little point in looking at your tax structure when the sale is about to go through. Early planning is the key to success.