Why do you own a business? Are you prepared for selling a business?
It’s interesting to consider because it’s shocking how many business owners haven’t taken the time to ask themselves these fundamental questions.
Your plans for what you will eventually do with your business is what we term the ‘end game’.
From a big picture perspective, having a business provides you with a particular lifestyle. It gives you cash now to fund your family spending, and hopefully a decent amount of money in the future when you eventually decide on selling it.
A good business mentor and friend of mine once taught me that “the point of having a business is to sell it – even if you don’t want to right now.”
This one pearl of wisdom could mean hundreds of thousands or even millions of dollars for you in the future if you let it guide you now.
Five tips to ensure a good sale when preparing for selling a business
1. Always be in preparation mode
As you run your business, you need to make decisions in the present that will help to sell the business in the future – even if you don’t plan to sell it for many years.You should be continually be thinking about operational and cost efficiencies, and how to maximise profitability. This may be “a given”, but often business owners get so bogged down in the day to day it can be easy to take your eye off the ball. Make sure cost reduction and decisions to drive value are your key focus and are easily demonstrable in the future.
2. Reduce your input in the day to day
The greatest thing you can do is make changes so that your business does not depend on you. If your business needs you to operate – can you sell it? The answer is no.Setting up systems is key. You need to train your team to adhere to systems put in place, and then gradually delegate what you do to strong team members that are capable of taking over operations. A business that can run on its own without the need for you (this sounds harsh – but it is essential) is the type of business that will be attractive to people looking to buy. Remember you are selling a business, not yourself!
3. Know and define the real profitability of your business
Don’t wait until the last minute to “clean up” your books. Look for cost efficiencies early, removing non-business assets, like that “company car”, and make sure to identify non-recurring (i.e. a significant one-off legal expense) that should be excluded from a buyers analysis of your business.
4. Have well organised legal documentation
Your business documentation needs to be in order; this should be an ongoing project as it’s much easier to maintain good record keeping and documentation than it is to fix it later. Keep documents regarding your business structure, licencing, contracts and agreements safe and readily available. Should the day come you wish to sell, you’ll thank yourself.
5. Seek professional advice
Selling your business is in many cases hard and tedious, don’t try and do it alone. Seek out a valuation of your business, get an accountant to assist you to manage your books and help with tax planning, and hire a financial advisor that understands your personal and business circumstances so they can advise you on deal structure and while making tough decisions.
Are you thinking ahead and need someone to be your sounding board? That is what we are here for. As experienced financial business advisors and partners, we help business owners work on their ‘End Game’ so that they have a plan and are prepared for selling a business for its maximum value when the time comes.
Selling Your Business Questionnaire
Did you know that there are a lot of tax concessions available to business owners? However, many of are not automatically accessible, and if not carefully planned, it can mean missing out on huge savings come time to sell.