How To Prepare Your Business For Sale

How To Prepare Your Business For Sale

When you come to sell your business, you’re likely to want to carry out a few last-minute improvements, in order to present a more enticing proposition to potential buyers.

Papering over the cracks in this manner may well help to make your business more appealing to investors, but it’s unlikely to ensure that you achieve the true value of the business. The reality is that you will be in a stronger position, if you are able to start preparing at a much earlier stage.

Get the corporate structure right

Any prospective buyer will want to be sure that you have a suitable structure in place. They will be particularly keen to understand who the current shareholders are and what their expectations consist of.

Selling a business effectively is all about demonstrating to buyers that there are few risks, or nasty surprises, associated with the purchase. A lack of clarity in the structure will naturally lead to concerns, making it important that you resolve such issues before you actively look to market the business.

Ensure that a strong management team is in place

One of the main weaknesses of any small business is often an over-reliance on the owner. This is a real concern for buyers, since the owner won’t usually be present, once the sale has been completed.

You need to understand that potential buyers will be thinking about how the business will run in the years ahead. If they can’t see a way of making things work, once you are no longer involved, they clearly won’t be minded to proceed with the purchase.

Handing over your role to other individuals isn’t always easy, but it’s something that should be considering in advance of the sale. By looking to delegate authority and roles at an early stage, you can ensure that the business is in a much stronger position.

Be clear about the financial situation

Potential buyers may like the services that your business is offering and they may have a real affinity with what you have achieved. Ultimately, however, it’s likely that their decision to buy will largely be based on the financial fundamentals.

You should expect to have key financial information available, including profit and loss statements, cash flow forecasts and details of any outstanding loans. By presenting all of this information at the outset, in a transparent manner, you will be offering reassurance that you have nothing to hide.

Build up cash reserves

The cash flow situation of any business can be a cause for concern and the proposed buyers may well be wondering whether they will be able to pay the bills over the initial few months of owning the business.

It’s unlikely that they’ll want to commit more of their own money to the process. By demonstrating that the business has plenty of cash in the bank, you can ease these worries and offer a far more appealing situation.

Deal with loose ends

When people sell their homes, they often invest in a few improvements, prior to putting properties on the market. This is primarily done to attract more potential buyers and to increase the selling price. The same principle can also be applied to selling a commercial entity.

You may be tempted to leave some jobs outstanding, safe in the knowledge that you are providing obvious examples of room for improvement. You may reason that this allows buyers to imagine that they are getting a bargain.

Unfortunately, it’s likely that you are simply presenting prospective buyers with a list of jobs that they would rather avoid. It makes far more sense to invest in improvements, before attempting to make the sale.

Getting the best value for your business relies on offering clear information and allowing buyers to understand the nature of the risks involved. Your ability to present the business in a positive light will have a significant impact on the eventual sale price.

This article was contributed by BusinessesForSale.com, the market-leading directory of business opportunities from online media group Dynamis.

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