Is your business ready for sale?
Before putting your business up for sale, ensure that your business is sale ready. Having a business exit strategy will increase your chances of achieving an outcome that meets your objectives and ensures that you achieve a good return on your investment. With more and more businesses coming on market, being sale ready is more important than ever.
What are the steps in business exit planning?
Businesses that are well managed and profitable will always be sought after. To ensure that your business is ‘sale ready’, check that the following is in order:
- Business documentation is in order
- Processes clearly documented
- Systems are capable of providing quality information
- Technology and software current and in good working order
- Staff employment agreements are current
- WIP & debtor recovery is strong
- Financial performance is strong and has an improving trend
- Budget to actual performance is documented and actively managed
- Arrangements with business partners, service providers etc are documented and up to date
- Your business plan and is well documented and being implemented
One of the key considerations when assessing the readiness of your business for sale is the businesses level of principal reliance. If your business is principal reliant it may be difficult to find someone willing to take over your business.
You will need to reduce the dependence of your business on the principal and any other key staff who will be leaving the business at the time of sale.
In order to rectify this situation it is important to start planning for the sale of your business years in advance. You may decide that an internal transition of ownership is your best exit option. Do you have a future successor in your business? A key staff member is often the best person to consider as a possible successor as you can start transitioning client management and other responsibilities a lot earlier than if you were selling to an external successor.
Another key consideration is ensuring you have strong relationships with your clients, suppliers and business partners. This will lower the risks in your business and make it more attractive to a future purchaser.
Key Value Drivers
There are numerous key value drivers you should focus on to optimise the value of your business and ensure that you get the most money for your business when it comes time to sell. In addition to the value drivers already discussed, some of the other key value drivers are:
- Loyal customers
- Innovative and different
- Benchmarking performance
- Good systems
- Loyal & committed staff
- Business growth and succession planning
Business exit strategy checklist
The following is a guide as to what you need to do before putting your business on the market or approaching potential successors.
- Prepare a Selling Memorandum – includes unique selling points
- Prepare a Register for Sale – documentation to be given to potential buyers
- Obtain a business valuation
- Discuss your proposed sale with your professional advisers
- Obtain tax advice prior to sale
- Determine the purchase price
A helpful tool for checking that your documentation is in order is to complete a ‘Planning for Sale Checklist’. This is a step by step guide in preparing the information you will need to show prospective purchasers and is a good way of double-checking that your house is in order.
If you need support preparing your business exit strategy talk to our business advisory team today. MGI’s CFO advisory team and business coaches can help you get sale ready. Our succession planning services will help you make calm and considered decisions about the long term future of your business. Give us a call today to start preparing your business sale plan.
You might also be interested in our recent post on business succession.