Selling a business can be a turbulent period for everyone involved. To help make the process as smooth as possible, here are a few fundamental tips that will assist.
Quality and In Depth Records
Having in depth and extended financial records is crucial. The more in depth these records are, the greater the opportunity there is for an analyst to maximise the businesses attractiveness. There are hundreds of trends an analyst may be able to find such as, over/ underspending in areas of the business relative to industry, under utilization of capital resources, or a growing market share despite declining profits. With a thorough analysis of detailed records, a financial expert should be able to find an area to mend or a strength to emphasize when selling the business.
Accurate and Easily Explainable Valuations
Valuations should be thorough and easily understood. To achieve this, future revenues and risks need to be accurately modelled. Revenue and profits need to be broken down to come solely from the businesses core operations with adjustments to costs and revenues from the businesses peripheral activities. Once this is achieved and the risks, which can span from cyber security, to supplier contract analysis are accurately implemented into the model the owner can be given a relatively clear idea of the businesses value, and how changes to any of these factors will impact the business value.
Focus on Usual Business Operations
When selling a business it is essential a business owner continues to focus of the daily and even future operations of the business. The time frame for the sale of a business, can vary from several weeks to several years depending on the market and the business size. It is essential the business doesn’t fall away and lose value over this period. Sometimes management may need to increase their workload. An example of this could be adjusting their inventory management strategy during the period to use a just-in-time strategy to avoid over holding stock and complicating the process.
Thoroughly Prepare Existing Managers
If existing managers of the business are passionate and highly knowledgeable about the business and its future it can be very attractive to both strategic and financial buyers. These types of managers can greatly simplify the transferability of ownership and can be crucial in maximizing both cost and revenue synergies for strategic buyers.
Confidentiality is necessary for the entire process. Many issues can arise such as rivals poaching key staff, and or the creation of customer and supplier unrest. In order to minimize these risks a confidentiality deed is always signed.
Generate Competitive Tension
Naturally competitive tension created through numerous potential buyers can boost the demand and obviously the price offered by interested parties. Through contacting a number of potential buyers it can not only generate the best monetary return, but can give the owner a greater input in choosing a buyer who’s values and future plans for the business closely align with theirs. This results in a more satisfactory outcome than simply selling to the buyer offering the highest upfront monetary payment.
Be Flexible With Payment Options
Flexible payment options opposed to one sum payments can be more beneficial to both parties. If planned correctly and innovatively, it can reduce risk and generate a higher sale price for the owner. Flexible payments options can also be negotiated is ways that simultaneously benefit the buyer, who may want to use the seller of the business they are acquiring to thoroughly assist in maximizing synergies.
Ultimately there is a never ending list of ways to smoothen and enhance the sale of a business. With clear communication lines, patience and expert assistance the sale of a business should provide a beneficial outcome for all involved.
Book a FREE consultation
If you could benefit from Quinn M&A’s comprehensive transactional advisory services, contact us on +612 9223 9166 or submit an Express Enquiry through our website to register for a free confidential consultation.