Am I ready to sell my business? Here’s how to find out.
Okay, so you’re thinking that maybe it’s time to sell your business.
But what is your reason for considering selling?
Are you selling because you’ve lost interest and have just had enough? Maybe you no longer have the energy, skills or resources to grow the business.Perhaps your health is not the best and you are finding that you are struggling to cope.
Maybe you believe that your business doesn’t have the capital to survive.
Usually, small businesses are highly liquid and risky assets. Without adequate capital, you can’t realize the full potential of your business. If you need more liquidity and are presented with the possibility of selling your business, you may want to consider this opportunity. This can be more advantageous if the value of your business is already high.
On a more positive note, you may be considering selling because your business has grown substantially and and you believe that it’s time to cash up your nest egg and go and smell the roses.
Running a business is risky, and the bigger you get, the bigger the risks you have to face.
If your motivation for selling is because your business has enjoyed substantial growth, this can be very appealing to buyers and you can often get a great deal from the sale. Some business owners just want to take a lump sum of money from the sale, and the best time to do this is when you can show substantial and consistent sales growth and earnings.
Whatever the reason, you need to make sure that you are ready to let go and that your business is fully up to scratch so that you can reap the benefits from your years of hard graft.
Selling requires careful planning—everything from cleaning up sloppy books and tax records to dressing up a tired store and updating old operating systems—even ramping up marketing to juice sales and command a higher asking price.
In the coming decade, many SME’s will change hands as baby boomers continue to retire in droves. And according to Xero Accounting Software, upwards of 90,000 Kiwi Baby Boomer business-owners are expected to sell within the next 10 years. This means that you cannot afford to be left way down the list to sell and be overtaken by better-prepared businesses.
At The Business Exit Company we work with our clients on up to 100 separate aspects of their businesses to ensure they are fully sale-ready and in a position to maximise their sale potential.
Here’s nine important actions to consider for starters:
1. Prepare your Exit Strategy in Advance
All too often, an unexpected factor—an aging or ill owner, lack of interest in succession from adult children, a competitive threat such as the arrival of a bigger competitor forces small business owners to sell. So, if you plan to outlast your competitors, prepare your exit strategy now, before such a situation forces a sale.
2. Recurring Revenue
The more sales you have from automatically recurring contracts or subscriptions, the more valuable your business will be to a buyer. Even if subscriptions are not the norm in your industry, if you can find some form of recurring turnover it will make your company much more valuable than those of your competitors.
3. Sales Predictability
Businesses that have mastered a way to win customers with a documented sales funnel that produces a predictable set of conversion rates are much more valuable. An acquirer will be attracted to your proven customer-acquiring formula rather than an industry peer who doesn’t have a clue where their next customer will come from.
4. Niche Positioning
Buyers purchase what they cannot easily replicate on their own, which means that companies with a unique product or service which is difficult for a competitor to ‘knock off’ are more valuable than a company that sells the same commodity as everyone else in their industry.
Acquirers looking to fuel their top line turnover growth through acquisition will pay a premium for your business if it is growing much faster than your industry average.
6. Business with a 2IC
A business with a general manager or a second-in-command who has agreed to stay on post sale is more valuable than businesses where all the power and knowledge are in the hands of the owner.
7. Customer Diversity
Buyers pay a premium for companies that are not over reliant on a major customer. Ensure no customer amounts to more than 10 percent of your turnover and your company will be more valuable than an industry peer with just a few big customers.
8. Happy Customers
Being able to objectively demonstrate that your customers are happy and intend to re-purchase in the future will make your business more valuable than an industry peer that does not have a means of tracking customer satisfaction.
9. A Systemised Business
Written systems and processes significantly increase the value of a business as it can more easily be transferred to a new owner or duplicated. Before selling, you want a business that runs without you. This alone can add significant value to your business and greatly reduce the time you need to spend supporting the new owner.
So, if you are now thinking of selling and not sure where to start or you are time-poor and need help, call us for a free, no-obligation 15 minute phone-call on how we can help you to put together an Exit Plan so you can achieve the maximum sale potential for your business. Visit www.businessexit.co.nz, watch our FREE VIDEO and book a time in our calendar that suits you.
To your business sale success.