So you want to sell your business?*/
Is it sellable?
Of course, it is, you say! Selling a business can be similar to selling a family home. Blinded by the emotional connection, we fail to see the actual value in it.
It can take months, even years to prepare a business for sale. Having an ABN, a few customers and turnover do not equal an attractive purchase. To prepare for sale, you need to consider:
- Who would buy the business and why?
- Would they be ‘buying’ a job or an investment opportunity?
- Is there a plan for achieving its potential?
Once you have clarity on the above, you’ll first need to know:
- The ROI (read more about that here) and all the business financials
- The Market value
- The Asset value
- The business roadmap (how will it continue to grow)
- What’s for sale? The IP? The assets? The property?
- The succession plan
- All employment contracts and documents are up-to-date and documented
- Outstanding debts are collected, and creditors are paid
And that’s just to get a lay of the land. Access the Australian Government’s free resources which outline where you need to start when considering selling your business. Click here.
Why would someone buy it?
While you are focused on selling the business, it is essential to step into the other shoes and ask why someone would buy this business?
When you can understand what type of buyer the business would attract, you have a better chance of setting up the sale for success.
People buy businesses for different reasons and come to the table with varying effort expectations. For example, does the buyer need to work day in, day out on the business, or does it run itself?
Understanding if what you are selling is a job or an investment is the first step.
Consider where the business could go. What could the buyer build on to enhance the offering or drive more sales?
Think like a buyer and consider all the pros and cons of your business. Start by checking out the steps Business.gov.au suggest people take when looking to buy an existing business.
When you can understand the benefits, values, opportunities and costs associated with what you are offering, you can find the right buyer for your business.
What’s your timeframe and how much will you take?
If you want to sell now, you’re too late. To prepare a business for a successful sale, you need to allow yourself at least 12 months. However, sometimes unexpected situations arise that mean you are forced into a position you were not ready for.
In that case, at minimum, you will need six months to prepare your business for sale. It takes 6-9 months to sell a business in Australia.
You need enough time to reduce the amount of risk and uncertainty for a buyer, which means your time to sell needs to encompass what you need to do to get everything in order.
This is why we advocate for a succession plan before you need it. Planning what’s next is the insurance policy you won’t know you need until it’s too late. This is our speciality, we help businesses prepare for sale or exit through a growth strategy that allows the business to succeed without the original owner at the helm. If this is a situation you want to prepare for, click here to book a free strategy call to discuss.
No matter when you want to sell your business, the elephant in the room is at what price. On SEEK Business, the average cost of a business is $342,000. To start thinking about what the value of your business is follow this guidance from the Australian Government, click here.
Your business’s worth hangs on its ability to make a consistent and sustainable profit. You may have invaluable relationships with supplies and stakeholders, but your potential buyer wants to know what’s in it for them (and usually, that’s the cash they can expect).
What you get offered and in what timeframe can also be determined by the circumstances of the sale. Preparing a succession plan means no matter the situation you find yourself in, you have a robust business to bring to market. Your business can quickly be undervalued and underpriced if you don’t because it’s your only option.
Failing to prepare is preparing to fail
The National Association of Corporate Directors reported less than one in four private company boards have a succession plan in place.
Family Business Australia reported the plan family businesses had for their future fell into three categories:
- 41% intend to pass the business to family members
- 61% of family business owners would seriously consider selling if approached
- 44% of family business owners are planning to sell their business.
Family businesses make up around 70% of all private businesses in Australia. We can assume most don’t have a plan on how that looks. If you pass the business down without a plan, the rate of success drops with each transition.
In our previous blog, we shared Deloitte reported in family-owned businesses without a managed transition, only 30% survived into the second generation, 12% in the third and then only 3% thereafter. To discover how to create the right plan for your business, download the Australian Government succession plan template.
A succession plan is your get-out-of-jail-free card in the business world. No matter what happens, it allows you to be prepared and equipped. Of course, there are always external factors that come into play you need to be aware of but that is where a plan can guide you through.
Create a plan to always retain your control and make decisions from a place of power, not fear.
No need to panic, we can show you how to create a fool-proof plan to future-proof your business.