As business brokers and advisors working for both potential purchasers and vendors, we see the best and worst of how business owners go about exiting their businesses.
Below are 4 questions to consider before selling:
1: What is your objective in selling?
- Do you want to sell because you’ve had the business for five years and the results have been poor?
- Do you want to sell because you’re over-exposed to borrowings, your cash flow is tight and you can’t see a way to get ahead?
- Do you want to sell because it’s time to retire or move on to the next stage of your career?
Be honest with yourself – your reasons for selling will help you create a negotiation framework to determine what an acceptable offer might be.
2: What is your business worth?
Seek a professional, independent valuation of what your business is worth.
Getting a valuation as to the likely fair market value of your business is critical to making decisions against your objectives in selling.
3: What help do you need to sell it?
If you decide to use a professional business broker or advisor, you will need to first evaluate their abilities.
A broker needs to have:
- Experience
- Project management skills
- Communication skills.
To determine whether your potential broker has these attributes, ask for the following evidence:
- Examples of businesses like yours they have sold
- The shapes of the deals they’ve done with these businesses
- An indication of the process they intend to implement to sell your business
- The level of communication and reporting – verbal, written, formal and informal – that will be provided as part of the sale process to keep you abreast of progress
- Referees you can speak to i.e. business owners they have worked with to sell their businesses.
4. Do you have key information ready for purchasers?
Make sure you have a professional, credible information memorandum (IM) on your business sale opportunity, ready to provide potential purchasers.
When preparing an IM, put yourself in the shoes of a potential purchaser. What would you want to know before making a decision about such an important purchase?
Contact the team at JPAbusiness on 02 6360 0360 or 02 9893 1803 for advice and support on any aspect of selling a business.
