Key factors to maximise the sale potential of your business

If you are intending to sell your business there is key information that as a business owner you will be required to produce for an interested buyer.

1. The contact details of your solicitor and accountant
2. The most current 5 years of financial statements available 
3. The most current 5 years of tax returns available 
4. A full list of Plant and Equipment and with an approximation of value or book values 
5. A copy of the current lease available 
6. Details of the weekly or monthly turnover for the previous 12 months
7. A copy available of your current Business Name Registration certificate
8. Copies on hand of any licenses, permits, insurances etc. that are relevant to the operation of the business
9. Any invoices for purchases made in the last three months
10. Details of employment rosters and details of all staff with their length of employment, their skills, duties, their remuneration (wages or salaries) and if there are contracts in place with key employees.

The following 5 key areas of a business are important to focus on when preparing to sell a business

1. Financials

A serious and qualified buyer will be expecting that business financial statements and details of business sales will be ready and available to view. If the owner of the business is unable to provide them, it will raise concerns for the interested buyer. Larger businesses should have a budget and cashflow forecasts available as well. 

When it is time to go through the due diligence process, access to all financial records of the business will be required. Having these records all up to date and available to show a buyer will provide a faster and smoother process to settlement.

2. Legitimising Relationships with Suppliers and Customers

Often business relationships are founded on a handshake and informal agreements. If you have exclusive supply agreements or long-standing contracts in place, the time to formalise any key relationships you have is when you are preparing to sell your business. Whilst a buyer will understand that relationships are often based on informal agreements, they will of course prefer and maybe insist that the business has binding agreements that are transferable to a new owner. Other factors that relate to intellectual property i.e. copyrights, patents etc. also apply in the same way assuming such items are important to the value of the business.

3. Procedures and Systems

It is often the case that medium to large businesses as well as franchises have formal operation and procedure manuals in place. Most smaller businesses however that have been run primarily by the proprietor often do not. Most commonly the intellectual property and the knowledge of how the business functions are retained in the mind of the owner. The value of a business will be greater if it can be shown that the operations of the business does not rely on the owner. Prospective buyers will want to feel confident that the success of the business does not rely on the current owner. It needs to be demonstrated that the business will still be viable without the owner. The way the business functions therefore needs to be documented. This includes all aspects of the business i.e. sales, administration, procedures, techniques etc. as well as any other systems. 

4. Location

If the success of the business is dependant a lot on its location, then with his being a crucial aspect of the sale of the business, it is critical that there is a long lease in place with favourable terms, such as options for renewal and fair rent reviews. With a solid lease in place as well as options to extend the lease prior to listing the business will provide strong assurance to a buyer.

5. Presentation

The first impressions that a buyer has of a business is important to their overall perception of how the business is managed. With this in mind, pay attention to the visual presentation of all aspects of your business i.e. gardens, windows, exterior, display areas, offices, toilets and work areas. 

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Disclaimer

This article is provided with the compliments of Alan Dinnie. It is genuinely intended to offer readers information to make better decisions and to give insight into various aspects of business in general, and more particularly related to the sale and purchase and management of businesses. 

All material presented herein is intended for informational purposes only. Information is compiled from sources deemed reliable but may be subject to errors and omissions. No statement is made as to the accuracy of any description. Alan Dinnie makes no warranties or representations regarding the information and excludes any liability which may arise because of the use of this information. This information is the copyright of Alan Dinnie.

Nothing herein shall be construed as legal, accounting, or other professional advice outside the realm of real estate and business brokerage. 

I trust you enjoy the article and that it provides you with useful information.

To your business success