3 Essential Elements For Selling Your Business
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Evidence, Methodology & Transparency
3 Essential Elements to ensure a Business Will Sell - Evidence, Methodology & Transparency
Evidence – Buyers are only interested in the evidence. Why? That is all that matters, the facts, what is transparent, and what is measured and what is declared. Many times I find a Seller is trying to sell their business to me (not literally), more like they are going overboard to try and sell me with ideas that usually are associated with a “Blue Sky” price tag that doesn’t have any supporting evidence or methodology.
When I ask “why do feel your business is worth that much” it’s either an emotional response or a naive response such as; “I have spent so many years working in this business that’s got to be worth something” or “my business is unique there is nothing like it so I want to get a premium price for it” more often than not (with a little research) I will find other competition or there is a back story to the business i.e. it’s been listed many times before – the market knows about it.
Methodology – in the world of business sales business brokers, accountants, solicitors, liquidators, financiers, and astute business people understand and adopted an accepted methodology that supports the price being offered to the market.
Several methods can be utilised to determine the price of a small to medium business. The most common methods are:
- Capitalisation of Future Maintainable Earnings
- Discounted Cashflow
- Industry Methods (Rules of Thumb)
- Cost to Create
- Liquidation Value
- Return on Investment Method
Transparency – be transparent, and make sure business accounts are current and completed; i.e full set of financials, corresponding BAS Statements, and Tax Returns for the same periods. For many good reasons, It is always a good idea to inform your accountant early that you are considering selling your business, why?
1. The Accountant won’t be ambushed with Due Diligence they didn’t know about
2. Involving the Accountant at the start of the selling process means the Accountant can get organised and prepare the financial statements with confidence before a business broker goes to the market.
3. Being fully transparent, and prepared should pave the way toward a smooth business transaction
Looking at your business through Buyers' eyes and asking yourself this question – Would I buy my business?', we know Buyers want to be told the truth, understand the financial performance of the business and have their professional advisors (accountant, solicitor), etc, advise them accordingly.
THE THREE KEY ELEMENTS TO ADOPT IN ANY BUSINESS INFORMATION MATERIAL
Want to know more please contact Ian Salter?
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