5 things to consider when selling a business

September 9, 2017

Selling a business takes a lot of research and preparation, almost as much as when you purchase a business.  It is important to price your business correctly if you are wanting to attract buyers. Research similar businesses and have your business information to hand. Here are a few things to consider when selling your business.

Price for what is, not what might be

Buyers generally do not pay for the business potential and look at the actual current revenue when working out if the business is worth the asking price or not. If you are trying to sell a concept, it takes something really special to get a buyer as most buyers look to acquire a business that is already making income.

Your revenue is not as important as your profits

When it comes to buying a business, the bottom line is what counts to savvy buyers. You may have high revenue, but if running costs are high and profits low, your purchase price would have to reflect this. A business with a much lower income but a higher profit margin will have a higher profit. The better the net profit, the better the value of the business.

Keep proper financial records

Keep a proper record of your invoicing, bank deposits as well as invoices from creditors to prove your business is generating the revenue you claim and your financial statements are legitimate. Buyers may need to see the actual bank statements or even the bank accounts live online to verify the monies deposited in to the business bank accounts. Using a proper accounting firm or auditors will give your business even more repute, but this isn’t always feasible for smaller businesses.

Base the price on the current business

A potential buyer is unlikely to care how much money the business made in the past, besides as an overview of the business history. The current financial year tells a more relevant story. Most buyers will want to look at the past 12 months of sales and costs and will base their decisions on these figures. A business might have done great in previous years, but is currently struggling. The buyer will look at the current situation when determining value. A buyer will not look at potential fixes in order for you to make a larger profit on the sale as these fixes are likely to cost money and do not guarantee an increase in revenue. A history which shows steady growth over the years may however, be good to show your potential buyer.

Be honest

Lying to a potential buyer will almost certainly result in a lost sale. Most buyers will do proper due diligence before purchasing a business so telling your potential buyer the truth is more likely to develop a trust in you and your business in the long run.

Be ready to answer many questions from many buyers wanting to buy your business

You might want to put together a sales pack with some of the most frequently asked questions, but you will still have to answers many of the questions from any potential buyer yourself.  For the busy business owner hiring a professional to do the work for them makes more sense due to the amount of time it takes to deal with potential buyers of the business. Instructing a good business broker to help sell the business will ensure that you only deal with qualified buyers and that time is not wasted on people who are window shopping and could not afford the purchase or have no actual interest in buying the business from you.

If you are thinking about selling your business then get in touch and find out more about our no risk approach to selling a business.

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