RightWay New Zealand - Blog

6 all-important factors when prepping your business for sale

Written by Desley Grant | 20 December 2017

The decision to sell your business is a big one.

If you’re considering putting your business on the market rather than passing it onto the next generation, it requires careful thought and preparation. After all, you’ve put countless hours of hard work into growing your company and selling it should be the realisation of those efforts.

While it might be tempting to think it’s as simple as putting up a ‘for sale’ sign, there are lots of things to take into account. Just as you followed strategic processes to build your successful business, you need to do the same when getting your business ready for sale.

There are several integral steps you should take which will enable you to gradually step away from the business, easing your emotional detachment and workload as you prepare to hand over the reins. These will also help you create and execute a successful exit plan.

In this blog post, we talk about getting a good understanding of exactly what processes and plans you’ll need to prepare your business for sale and make it as attractive as possible to potential buyers.

As a business owner, it’s important to ensure you’re taking the necessary steps to reach your goals.  A trusted advisor can help. To find out more, we recommend checking out our free eBook “10 tips for busy business owners”.

 

1. Approach selling your business the same way as selling a house

Everything should be in order - inside and out. Make sure your financial documents are up-to-date, and clearly outline the responsibilities and performance indicators for each role. Also consider the exterior of the property. Carry out any cosmetic changes such as a fresh coat of paint and any necessary maintenance to ensure it’s looking its best.

 

2. Have a game plan

Find a trusted business advisor who can guide and support you through the marketing and sale process. Discuss who potential buyers could be and how to best position your company during the marketing campaign to get the most value. Ideally, you’ll be looking for an investor willing to pay more for a business like yours that already has employees and systems in place.

 

3. Familiarise yourself with key stats

A good advisor will have a solid understanding of the valuation models that buyers will use when considering your business, such as assets plus goodwill, market value approach, or assets resale value. Speak to your advisor and make sure you have a good grasp on these numbers for your business. This will show your strengths, what you need to focus on, and will help you put a practical exit strategy in place.

 

4. Create a sales kit for success 

Work with your business advisor to put together an information and sales package that includes your marketing material and an overview of financials, staff contracts, assets, equipment, and operations details. This kit will give potential buyers an easily accessible analysis of your business and forms part of their due diligence. A good sales kit sets you up for success by highlighting the strengths of the business, attracting the right kind of buyer and making the sales process as straightforward as possible.

 

5. Cut non-critical expenses

When selling, you want your profits to be as high as possible. So, in the months and possibly years ahead of going to market, look at ways you can cut expenses that aren’t critical to the running of your business. Cutting expenses results in healthier looking P&L statements, which help immeasurably when negotiating your sale price.

 

6. Ensure your numbers are in tip-top shape

Your financial statements will play an essential role in the way your business is valued by potential buyers. So, if they’re not in order, you’ll not only lose credibility, but also potentially a sale. Consider having your financials reviewed by a reputable accounting firm which can find any weaknesses and reduce your time pressures during this period.

As you begin down the path of deciding whether to sell your business, there are a number of things to consider. If you choose to go ahead, taking the steps we’ve discussed will ensure you’re well prepared and on your way to a successful result that realises the value of your hard work.