After many years of running your business, preparing an exit strategy may be a tough process that affects both your personal and professional life. When selling your business, there are several factors to consider.
When am I ready to sell my business?
Working with experienced financial planners can help you decide when you can stop working realistically and exit your business. They can also help with deciding how much you might need from the selling of your business to meet your personal financial targets.
Personal cash flow planning may be a helpful tool for forecasting future income and taking into consideration the profits from selling your business, other assets and expenditures. This will demonstrate if you are on pace to meet your lifestyle and retirement objectives, as well as finding the best way to transform your business earnings into personal wealth.
Planning and experience are essential
Planning as far ahead as possible is key since poor planning and preparation may result in a huge loss of time, energy, effort and money. It is far more worthwhile to be proactive and take your business to market on your own terms, rather than waiting for a hostile or unsolicited contact when your business is not in the greatest condition to be sold.
Experience is also important, so seek guidance from specialist lawyers and finance accountants who have a high level of understanding and experience that can add value to your selling process while protecting you from risks. As a result, you will have a far greater chance of having a smooth process that is optimal for you, your business and your family.
Get the right team to help you
Getting the right team to give you the best outcome for you and your business is essential. Ensure that your lawyers, accountants and other professional advisers have a thorough knowledge of your long-term strategy, your goals as well as a good record of success in the type of deal you’re entering. This will assist in avoiding the dangers that might jeopardise the success of your selling strategy.
Take references and ask to converse with clients who have just sold their business so you can evaluate their experiences with the sales process and the guidance they got.
You should set a reasonable asking price for your business. If you set it too high, you risk scaring off potential buyers, but if you set it too low it may appear that there is an issue with your company.
There is no use in creating value in your business only to have it ruined by a valuation that fails to stand up to inspection, or fails to address the value drivers in your firm.
First impressions matter
When selling your business, first impressions always count. The buyer wants to see if your business has ‘curb appeal’, if it is in a competitive area and if it looks good overall. It’s important to keep the premise organised, with stock filled and business records updated.
With your professional advisers, you can look for anything that might become an issue with the value of the business so it can be addressed quickly and avoid negative impacts of selling. If any issues cannot be fixed, you can come up with solutions on dealing with them instead of giving a potential buyer more problems.
Before going into the sales process, you must solve any issues and ensure they are not pending.
Vendor due diligence report
Vendor due diligence is a procedure where either a specialist finance accountant or lawyer prepares a detailed report regarding the financial and legal health of the business to future buyers. This gives an impartial view of the business’ performance and potential.
The report seeks to solve issues that demanding buyers may have, and it allows the business owner to have more control over the selling process and the timing, which can help obtain a better price for the business. It also allows the selling process to go more smoothly as it eliminates the need for a buyer to have extensive access to the business because they can depend on the vendor due diligence report.
Vendor due diligence can also assist in identifying significant issues in your business so you can fix these problem areas before a sales process begins with prospective buyers.
Understanding the buyer’s point of view
After you’ve received proposals for your business, make sure you learn about the buyer’s financial and internal processes and prepare to finance a portion of the deal yourself by reducing some of the sale price.
Because you and the buyer will almost always have a strong working relationship before and after the sale, it makes sense to leave tough or possibly contentious matters to be addressed, wherever feasible, advisor to advisor.
Doing it the right way
Finally, ensure you devote the necessary time and effort to doing it properly. When selling your business , careful planning and using expert resources are the essential keys to achieving the best price possible.
Download a checklist
Click here to download a free checklist to help prepare your company for sale.
Need help with making an exit plan?
Whether you are self-employed or own a small business, we can advise and help with your exit plan. As an online accountants in East London, you can speak to one of our experts here.