Dos and don'ts of selling your business

If you’re a business owner you know that there are many challenges of running a business. One of the biggest decisions you’ll make, apart from starting or buying a business, is when you decide it’s time to sell. Selling a business is a significant decision that can have far-reaching consequences, both positive and negative. It's important to approach the sale with caution and consideration to make sure you get a successful outcome. Here are some dos and don’ts to help guide you through the process.

Do

Do your research: Before you put your business up for sale, research the market to gauge the potential price, understand the competition and what makes your business unique, and identify prospective buyers.

Clean up your business: A well-maintained and organized business will be more attractive to buyers. Take the time to tidy up the physical space, update your website, and refresh your marketing materials. Ensure that your business is legally compliant and that all necessary documentation is in order. This includes contracts, employee agreements, and any permits or licenses.

Choose the right advisor. Selling a business can be a complex process so consider working with someone who knows your business or who is familiar with your industry. Just talking through the process with a third party might uncover potential points of risk or obstacles to the sale that you hadn’t considered.

Be ready to give reasons why you are selling, have a story to tell, keep it positive.

Be open to non-conventional offers or out of the box ideas. A walk in, walk out transaction might not happen. Could part of the business be sold? Options like a vendor finance agreement, where the purchaser pays off the purchase price over an agreed timeframe may get a buyer over the line.

Be clear on what you want out of the transaction- what is non-negotiable, what are you flexible on?

Be open to continuing involvement in the business to train up the new owners or ensure business continuity. You can negotiate terms like length of service and remuneration that may be a win-win for you and the purchaser.

Don’t

Don’t go to market if you’re not ready. Typically a buyer would want to see three years of financials, so make sure they are up-to-date and accurate. This includes tax returns, profit and loss statements, and balance sheets. It might be better to delay the sale until you have all your ducks in a row.

Don’t fixate on the negatives about the business. Things that you see as tough or difficult may not faze some buyers. Everyone’s experience, mindset and skill set is different. Be upfront about any challenges or potential issues with the business and be prepared to provide all relevant information to potential buyers. Buyers will appreciate honesty and transparency during the sale process.

Don’t lose your motivation during the sales process. You’ve spent time, money and effort to grow your business, don’t undermine the value that you have created. Continuing to run your business as usual during the sale process is important to maintain its value and attract buyers. Don't let the sale process distract you from the day to day running your business.

Don't ignore the buyer's needs: The sale process is about finding a buyer who is a good fit for your business, not just about finding the highest bidder. Consider the buyer's goals, motivations, and plans for the business, and be sure to negotiate a deal that benefits both parties.

Don’t try to do it all yourself. Business brokers or specialist sales agents in your industry can be instrumental in a successful sale. Yes, they will take a commission but the good ones will add value to the process. An agent can manage things like buyer enquiries and confidentiality agreements as well as providing a third party opinion on your business and a realistic appraisal of the selling price.

The wrap up

Selling a business isn’t easy. It will take time and energy, careful planning, research, and preparation. By following the dos and don’ts outlined above, you’ll be on your way to successful outcome but like with all big financial decisions, we recommend getting independent financial advice, to ensure that the transition is smooth and positive for everyone involved.

Please note this information is general in nature and does not take into account your personal circumstances or objectives. You should consider this before acting on any of the information contained.