Thinking About Selling Your Business?

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TeamPlayer

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Depending on the size of your business selling it is likely to be a big deal. For many owners, selling the business they've spent a lot of time - probably years - building up, can be difficult emotionally too.

Unless you've done it before, how do you know which are the best ways to dispose of your business?

Ways to sell

Most businesses are sold in a trade sale to a similar type of business. Sometimes a private investor or individual might find your business an attractive opportunity.

There are several different sale options. There is no one right way to cover all businesses. The one right for you will depend on your individual circumstances and the legal status of your business.

What type of sale

There are several options here. Selling the entire business gives you complete freedom from it, and is likely to realize the most money. Or, hold on to a stake in it. Sometimes the purchaser prefers you to retain partial ownership and have an involvement in the business. This can give the business continuity and the purchaser confidence that the business will do well.

You can of course just sell some of your assets, such as equipment.

Do you want or need payment in full when the sale is completed, or are you prepared to accept payment in instalments. If you accept payments in instalments there is some risk involved if the purchaser cannot make future payments.

Is a sale realistic?

You might have faith in your business, but, that isn't necessarily enough. Someone has to be prepared to buy it. Can you identify strong reasons why your business would make a good purchase? If not it might be difficult to find a buyer. Buyers will be asking themselves:

* Is the business healthy? If it's in trouble it could be a strong deterrent to would-be purchasers. Though sometimes financial distress can be a motivating factor to a buyer who can see a turnaround opportunity.
* Is the business well-organized businesses with strong management.
* Does the business have a sound financial record?

It usually pays to start planning a sale well in advance. Leaving it to the last minute could mean you make expensive mistakes in the process. Planning ahead means you can choose the best moment rather than being rushed into a quick sale. For example if you plan to retire in a few years' time, start thinking about the sale of your business now. To prevent a negative reaction from customers and suppliers and eliminate unsettling and unnecessary worry for your staff it's best to keep your pans confidential.

Businesses generally sell better when their own business sector is doing well, purchasers can obtain low interest rates, and banks are willing to lend.

If you have fuller order books at a particular time of year that is likely to look better to prospective buyers than when they are emptier.

Planning ahead means you would ensure that equipment is well-maintained, key contracts are in order, that there is no outstanding legal issues or unresolved disputes and that you are complying with all legislation.

Will you need advisors?


You may need an accountant and a solicitor, unless your business is very small and uncomplicated. A window cleaning round, for example, is unlikely to need professionals to get involved, the cost itself would be out of proportion to the cost of the sale.

If you're using a firm of advisers, make sure the firm you choose is suitable for your business. A specialist in selling newsagents may not be all that good at selling a petrol station, or TV repair company.

Strong financial performance

Planning well ahead helps you ensure that your business has a financial record that attracts buyers.

Focus on ensuring that your finances are in good order. Reducing stock levels and controlling creditors can mean your finances is in better condition. Reduce debt by getting rid of old stock, or underused equipment.

Buyers usually prefer businesses that show increasing profits year on year. If possible, your financial performance should be reasonably stable throughout the year. You may be able to bring forward or delay purchases and sales to help with this.

If you have a full order book that's always a good signal for prospective buyers.

Also, make realistic provisions for bad debts.

Consider a reduction on advertising to lower your outgoings. But don't go overboard otherwise your business could suffer and you may not get the price you are asking if profits nosedive.

Throughout the sale process, you should show that you will be flexible and co-operative. If you are prepared to spend some time after the sale helping the buyer get acclimatised to the business that will give them some encouragement to make the purchase. If you are able to then your being willing to work for the company for a fixed period after the sale is completed may even help cement the deal.
 
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