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4 things to consider before selling your business

WRITTEN BYJames Price | JPAbusiness

selling a business

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:

  1. Experience
  2. Project management skills
  3. 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.

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About James Price | JPAbusiness James Price has over 30 years’ experience in providing strategic, commercial and financial advice to Australian and international business clients. James’ blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.