Over the last few years, we have worked with many business owners. From our experience we can give some expert tips.
In the process of selling a business, preparation is an important step. The main benefit of sale preparation is to review it with a fresh eye. Business owner tend to get involved in the day-to-day affairs of the business and barely get time to look at things and consider things as objectively as possible. With the Sale preparation it can help business owner to do that.
A good business for sale preparation can help in creating a great first impression on prospective buyers. For smoothening of the sale journey, books of accounts and business documents must be in order, internal system must be reviewed and doing organizational improvements. Efforts made for sale preparation led to better valuation.
Process Business for Sale Preparation
There are no such rules for preparation of business for sale but we advise to opt a methodical approach. In sale preparation one can start by getting together with key team members, and it is preferable from different functional areas such as marketing, distribution, finance and accounts, product development, human resources and so on. Take a decision regarding what can be done to make things better and identify their objective.
For business for sale preparation take a time-based approach. Take a decision regarding who will be responsible for key improvement areas? And accountable to whom. Identify the on-going affairs of the business.
It should be kept in mind that this activity should not disrupt your usual business as far as possible. Periodically monitor the results of sale preparation and make sure that team members work efficiently.
Time Duration to Prepare Your Business for Sale
The time duration of sale preparation is again a matter of judgment. Sale preparation is mainly a function of two parameters:
More time period will be required in case more improvements are required to make. It is important for entrepreneur to distinguish the critical aspect from the less critical one.
Usually for most of the buyer’s books of accounts must be in shape is a priority. One should keep an eye on timeline goals for selling business.
In case you are considering selling your business, then sale preparation should be started right away. You will get no good time to start. At the time of handling buyer inquiries, you will be more prepared if you start earlier and you will have the more advantage.
With the help of business for sale preparation, you will be better able to take stock of things and will get an objective view of business where it stands as of now, and in available time period what can be done. The common mistake which seller makes is delaying in the process so the more you delay, the more you will lose out. Now you should go for it and start preparing your business for sale.
Reason for Selling a Business
Capital Crunch
Lack of capital to fund the continued operations of the business. It may happen that your planning didn’t go well as planned and you are in a position that you can’t even fund the continued operations of the business and there is a situation of bankruptcy.
Strategic Reason
When selling a business, you want to sell because you want to pursue a different opportunity, for e.g.: if someone wants to concentrate more on the core business and wants to sell-off the non-core business from which they can’t leverage the resources.
Exit Strategy
You are ready to move on from your small business and want to establish a new bigger business. Having an exit strategy worked out in advance gives the buyera chance to maximize your profits and make the selling deal a success.
Market Saturation
It may happen that the market is changing in a way that will make the firm’s offerings obsolete or less desirable. So, the business performance in the coming years might not be printable.
Management Issues
Many times, it happens that the business owners are incapable of running a business due to the lack of management knowledge and capabilities.
Retirement
Increasingly retirement is becoming a very common reason for selling of business, especially small businesses if the second generation is not keen to continue the business.
Strong Buyer’s Interest
Unimaginably high price offered by the buyer and the revenue of that magnitude may not be achieved in the coming years, may become a reason for the seller to sell-off the business.
Partnership/Family Disputes
There might be some disputes at the partnership end or may be a family dispute in case of the family-owned business, which can be a problem for the business to be continued and managed efficiently.
To Raise Capital to Start/Buy Another Business
The buyer may be interested in investing in some other booming industry, where he can foresee higher returns. Excitement to start a new venture, where the interest of the seller lies is another reason to sell-off the current business.
Leveraging the Goodwill
Here the business on sale might be in the matured phase, and can be an excellent sell-off. In this case the seller’s expectation is to leverage the brand equity built in a certain period.