This guide is provided by BusinessesForSale.com – the leading global website for the buying and selling of small and medium sized businesses.
To capitalise on selling your business, you want it to be at its best so that it will attract interest and a good price. Remember: your business is only worth what the highest bidder will pay and few people want to buy unsuccessful businesses.
Preparation It is important to make all the paperwork as impressive as possible:
- Increase your sales figures through aggressive campaigning or offering a special deal for customers
- Reduce your costs, for example, avoid making big purchases in the run up to the sale
- Eliminate certain expenses that need not be listed, such as company vehicles used mostly for personal use
- Ensure that your information systems are up-to-date and transparent so that they will instill trust and confidence in the potential buyer
- Formalise employment contracts or deals with customers and suppliers
Take care over presentation and attention to detail so that any questions a buyer may have are answered in advance.
Sell, sell, sell
Now you are ready to start marketing the business for sale.
The concept of marketing is simple: you show potential buyers that your business can offer exactly what they are looking for. The tricky part is defining your target market and choosing the right approach.
You must then decide how much information to reveal, to whom and at what stage. Life will be simpler if you do things in the right order:
- Research potential buyers and draw up a list of no more than 30 names. Decide who to approach first
- Be sensitive in your approach, contacting an owner/manager personally but without revealing the name of your business
- Your legal adviser will draw up a confidentiality agreement for interested buyers to sign
- Send out a sales memorandum, describing where and when meetings with buyers can take place and inviting initial offers to be made
- Compose a reduced shortlist from the people who get back to you. Who can you trust? Who has the cash?
Confidentiality is extremely hard to police, so if you have any reason to distrust a buyer then don't disclose information unnecessarily.
Getting the best deal
Once the potential buyers appear you must look to obtain the best deal possible.
Creating competition between potential buyers is a sure way to encourage higher bids. Once you've estimated a price based on the results of the valuation, you can reject any buyers who fail to reach that mark. The rest may then feel obliged to increase their offers.
Clinching a deal with the most attractive bidder can be a drawn out process. Don't be seduced by an eye-catching package without checking that the details are genuine.
- Your preferred buyer should be able to prove their credentials with financial documents and a general transparency about the deal
- Both you and the buyers must be open about what you expect from each other, such as liabilities, responsibilities, form of payment
- Once you've chosen a buyer, draw up Heads of Terms so that you've reached a basic signed agreement. Inform the other bidders of your choice
- Agree a timetable for the sale
Before the sale can be seen as 'safe', the offer should undergo further due diligence. The buyer may want to bring in an accountant and a lawyer, but the most difficult stage is over.