Preparing To Sell Your Business
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Here is our advice on some of the things which should be done to prepare a business for sale. Being prepared is the key to maximising the value of any business as well as ensuring that the sale goes as smoothly as possible.
When planning to sell a business, it is important to remember that selling a business can take up to 12 months and may involve on-going commitment during a transition period.
1. Value your business
It is important to understand a realistic value for your business as the very starting point for any divestiture process. Any valuation needs to be objective, industry specific and from an external source.
A business valuation will give an pricing range and will allow you to understand how different bids compare to the market value. It will also tell you your company's competitiveness, financial situation, weaknesses and strengths.
Obtain a valuation from an accountant or an experienced business broker. The organisation performing the valuation must have access to current accounts and forecasts. Most importantly, any business broker needs to understand current industry sentiment and having a clear sector understanding is imperative.
2. Accounts
A buyer is most likely to need 3 years of accounts. If your accounts are professional and well prepared you will make a much better impression with the potential buyer. Well prepared accounts also make due diligence simpler, quicker and cheaper.
3. What is the business' true profitability?
SMEs frequently claim a variety of non-operational expenses as a way of minimising their bottom line for tax reasons. It is vital to understand what these claims are and have the necessary evidence to demonstrate why they should be excluded.
If there are one-off expenses that the company has incurred during the past 3 yrs that should be excluded from the recurring cash flow.
4. Financial information
An early conversation with a financial advisor to understand both the personal and corporate tax situation is imperative. An understanding of your tax situation will impact timing and may influence deal structure.
5. Paperwork
Prepare documents such as incorporation papers, permits, licensing agreements, contracts of employment, rental agreements, client/customer and vendor contracts. Make sure all documents are available, current and in order.
6. Succession planning
How will the buyer be supported after the sale. A succession plan must be in place before the business is marketed. An area for particular focus is to show the buyer how the day-to-day activities of the sellers will be replaced.
7. Divestiture motivation
Buyers always want to know why you are selling. Be prepared to articulate your reasons and make sure they are genuine.
8. Supporting advisory team
Use a sector-specific business broker who will be able to advise you before and during the selling process. We recommend that you contact business brokers, legal representatives and accountants who are proficient in mergers and acquisitions at least 3-6 months before you wish to start selling your company.
Most importantly concentrate on the business' core activity and do not become caught-up with the selling process. If your business does not perform as well it will give the buyer every reason to lower the price. A good advisory team will understand your need to focus on running the business and will allow you to do this.
Article Source: Articlelogy.com
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