6 EASY STEPS TO SELLING A BUSINESS
STEP 1 – PREPARING YOUR BUSINESS FOR SALE
You only sell your business once, so you’ve got one chance to get it right.
PLANNING THE SALE OF YOUR BUSINESS
Ideally you, your accountant and GMO will begin to prepare your business for sale well before you put it on the market. You want to ensure your business is represented at its best and highlighting its unique features and benefits.
MAKE YOURSELF REDUNDANT
Make it easy for a Buyer to step into your role. If you have all the knowledge and skills to run the business, the Buyer’s greatest fear is that the business will walk out the door when you do.
Document the policies and procedures that exist as unwritten rules. It is advisable to systemise the various functions of your business and create a Procedures Manual. Any Buyer will then be able to operate the business without the need to rely on you.
Each employee should have a documented clearly defined role, and a designated set of tasks and procedures, which leads to measurable outcomes.
Subject to your confidentiality needs, GMO will also help to document the relationships which are key to your business. We recommend converting any verbal agreements with suppliers and clients into written agreements wherever possible. Written agreements will make your business stronger and builds confidence in potential Buyers. Examine existing contracts with suppliers and customers to ensure they will not expire or require renegotiation just as a new owner steps in.
Ensure your financial records are up to date to clearly demonstrate the true profitability of your business to a potential Buyer.
- Debtors – collect all payments that are overdue from your clients. Potential Buyers may be discouraged about buying a business with clients who take a long time to pay their accounts.
- Creditors – ensure you are not late with payments to your suppliers. This will create a positive impression of the financial strength of your business.
- Produce monthly profit reports to demonstrate to your Buyer your ability to monitor and manage the performance of your business.
- Prepare audited financial statements so the potential Buyer is confident of the financial performance and value of the business.
Similar to selling any other valuable asset such as your home, there are several practical steps you can take to create a good first impression to a potential Buyer. You will improve the perception of value to the Buyer and may increase the price you can ask for your business.
- Inventory – sell all obsolete or slow-moving stock items. This will improve both your sales figures, and eliminate disputes about the value of inventory during the sale.
- Plant and equipment – sell any redundant or obsolete plant and equipment, machinery, spare parts and scrap that are no longer required.
- Business premises – look at your premises with the eyes of a potential Buyer. Clean up, maintain and paint the premises where necessary. Ensure the premises comply with all regulatory requirements.
- Employees – Retaining key employees after transition to the new owner may be important for a successful sale. Determine which employees are critical to the business and those prepared to stay. Ensure all employee contracts are up to date and calculate the staff entitlements.
- Commercial premises leases – Review business premises leases and ensure the lease does not expire or require renegotiation during the time when you plan to sell the business.