Essential Considerations Before Selling Your Business
Are you planning to sell your business in Canberra ACT or Sydney NSW or anywhere in Australia? The transition can be physically and mentally taxing – from arranging paperwork to passing on the responsibilities. Sellers are inclined to collaborate with professionals: brokers, lawyers, accountants, and advisors to reduce uncertainty.
In this article, we’ll tackle the emotional side of things first, then concisely enumerate the strategies and legal actions for a successful deal and a fulfilling life ahead.
A statistical report from the Exit Planning Institute found out that just about a year of selling their business, 75% of owners regretted their decision. Ending your entrepreneurial journey without giving it enough thought and planning can harm your peace of mind and financial situation.
Here are the most critical factors you must carefully consider before selling your business:
Purpose
The world of business is motivated by emotions and psychological tendencies of individuals. Before justifying every detail of the selling process, solidify your “why”. Why are you selling this business? Why now? Why not in the future? Some owners want an immediate exit for them to spend more time with their loved ones and settle. Others are looking for more business opportunities, and they carefully look for a buyer with the maximum return. Your whys will determine the core principles of the selling process.
Timing
When to sell? The general rule is when your business is at its prime, not when it’s declining, or the market is crashing. This tells the buyer that your company thrived under challenging circumstances.
After being fully in tune with your purpose, take the pulse of your industry and your specific market. Is the area of your operation being saturated with other businesses offering the same products and services? If the risks are high, what can you do to help the buyer realise the deal is still worth it? How well did your business performed in the past years? You can research on your own or have a professional broker do it for you and expose you to a community of potential buyers.
Valuation
This is the starting point of dealing with your business’s facts and figures. Here are four ways to determine the current value of your company and the ideal situations that will yield the highest returns:
1. Market Researched Value – If you’re already in a network inside your industry, this should be easy. You can gather information about the recent purchases, price ranges, and businesses’ sales similar to yours. All types of companies can do this. Just remember more data = better decision process.
2. Future Cash Flow Value – Selling based on the future. This determines your business’s future cash flow but is priced with its present value, calculated using the discount rate because of the risks involved. This is for companies that are newly established but have a high potential for growth and expansion.
3. Capitalisation of Earnings – Selling based on the past and present. This is the traditional process of selling your organisation. The value is based on annual cash flow, normalised profit and ROI, then projecting the future profitability from those computations. This method depends on the stability and reliability of your yearly figures’ statistics, usually used by an established business with steady revenue.
4. Asset-Based Value – Identifying the net asset by diminishing the liabilities from assets, tangible or intangible. The usual sellers are those with real estate or businesses with investments value in them.
Getting accurate figures will make you more confident about your business appraisal, which raises the chances of a successful deal.
Presentation
After the verifiable financial figures, make sure to prepare for the pitching sessions. Think of the presentation as transferring your certainty to your buyer’s mind.
But what certainty is that?
Certainty on the side of your business, its operations, the quality of people working in it, profitability, etc. Introduce your business’s ins and outs as accurately as possible, with digital and printed presentations that display professional and precise facts and figures. You must know the smallest details that your prospects can ask about. However, be completely transparent. No business is totally flawless. Stretching the truth will hurt every party in the transaction.
Plan For Your Future
This stage is like looping back to the first. However, there’s a fine line in between. The purpose is about your legacy, value, and emotional attachment to your business. At the same time, your future plan is personal; it encompasses the specific actions you must make for your desired future. Incorporate your personal goals to the successful transfer of your ownership of the business. What are your other safety nets for contingencies?
Karina Wolfin, the owner of Direct Appliance Rentals, believes in every business owner’s clear vision beyond their entrepreneurial life. She remarked, “If a person lives and breathes his business, there will always be some sort of void when selling it. Business owners are leaders, and purpose gives them life. This is why it is crucial to plan life after business. What’s your next passion? What’s your retirement plan?”
Contemplating these factors will ensure your business and, just as importantly, you are in the right state to sell. Having the right mindset will serve as your lenses – because marketing your business, especially if it’s your lifelong commitment, is not a straightforward process.
Here at Summit Business Brokers, we provide the community of sellers and buyers the comprehensive assistance to match the best deals of businesses on sale. For a consultation, feel free to call Andrew at 0418 676 400.
Written by Elizabeth Osborne
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ANDREW NUTTALL - PRINCIPAL
Andrew owned and operated a large, successful newsagency for 20 years before deciding to sell and plan the next phase of his life. Multiple agents, huge upfront fees and no results left Andrew frustrated and emotionally drained.
Many hours were spent reflecting on why the challenge to sell his business was so stressful and difficult. Summit Business Brokers was formed on the back of those experiences and Andrew’s desire to help other business owners and prospective business purchasers achieve their dreams, sell their business or buy a business and reach their summit.
Andrew decided to change the business model of business broking. Summit Business Brokers charge no upfront fees and no administration fees. You only pay a small monthly advertising fee, a fixed rate commission upon completion of a sale and NO commission on YOUR stock. What could be fairer and why would you settle for less?
20 years of business experience as an owner, combined with 22 years of real estate experience, has given Andrew vast exposure to numerous business environments and networks. The knowledge Andrew gained over the years will enable him to successfully assist you to buy or sell your business for all it’s worth.
How the team at Summit will maximise your profits:
Technology
Embrace the latest technologies from Australia and abroad to reach out and match buyers and sellers.
Network
Leverage national business networks (SME and Corporate) to gain increased exposure for your business.
Social Media
Ensure your business is on all social media platforms to “share” the opportunity and increase your business reach in the community.
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