Getting the best price for your business means having it in excellent shape to sell.
When you're preparing your business for sale, it's important to:
- Forecast your expected net profit over the coming year so you can outline how healthy the future is. Explain in as much detail as you can any changes to what is happening now (especially any projected increase in sales). Justify these with why.
- Try to show past stable financial cash flow through the year rather than big swings. You could delay or bring forward major purchases (or sales) to help smooth out any lumps and bumps.
- Improve your working capital position by selling under-used equipment and assets. Not only does this help the cash in the bank, it also makes your balance sheet look a little healthier. A new business owner usually prefers not to see old obsolete assets out the back which you’re asking them to pay for.
- Use efficient stock management software or a system that shows products or raw materials moving through the business quickly.
- Prove you have tight credit control and few bad debts or slow-paying customers.
- Have all your systems and processes of an excellent standard and well documented. Buyers will see more value in your business if you have good systems and can obtain accurate information quickly.
- Consider offering financial help to a buyer such as a payment plan or competitive financing if that would help the sale process.
Reassure them there are no loose ends
Any business looks far more attractive to potential buyers if you can demonstrate that it comes without any unresolved issues. Try the following:
- Have formal agreements with any key suppliers so you can guarantee that once the business is sold, the supplier will extend the same agreement with the new owner. Often these supply agreements of established lines of credit is what adds value to a business being bought.
- Extend any customer contracts or ongoing income.
- Make sure key employees will stay with the business. Consider implementing incentive plans or profit-sharing schemes for people you want to remain in the business.
- Go through all your agreements and contracts (from utilities to checking when your lease is due to expire so you can negotiate a new term in advance).
- Be sure to protect your intellectual property (IP) for any products or services you offer including Trademarks, Patents or Designs. Work with a qualified lawyer to protect your IP properly – and to make sure you’re not breaching anyone else’s.
Reassure them that customers will come back
If you can, reassure buyers that customers will stay. Focus on improving your customer experience so they keep coming back and put in place initiatives that a new owner can follow:
- Develop a number of customer profiles of your customers so the new owner has a clear idea of who you sell to.
- Document any customer loyalty programs or incentives.
- Maintain a database of best customers and the key relationships.
- Outline any customer relationships management software you use and how you encourage customers to repeat purchase.
- Identify your core competitors and outline the tactics to help customers choose your business.
Reassure them that you will attract new customers
Document your marketing plan to demonstrate how you plan to increase your customer base. New businesses are often sold on the promise of future sales not past revenue.
- Outline your social media strategy and which channels customers prefer (Facebook, LinkedIn, Twitter, Instagram).
- Document how you build word-of-mouth advertising. This is the most powerful marketing tool you can make use of, and it’s free. Identify what you do to provide an excellent customer experience so a new owner can replicate it.