As my clients understand well, the best method to prepare your business to sell requires a substantial time to prepare – up to two years. However, I know that some business owners suddenly choose to dispose of their company and are hoping to sell it by today. Therefore, they do not have the time to do long-term planning. There are a variety of reasons why this happens:
- Sudden onset of severe debilitating illness.
- An intense mental burnout makes you stop being able to cope with dealing with the constant work pressure of running your business.
- An awareness that your company is in decline and that you don’t have the motivation or energy to reverse the slide.
- It’s just a matter of delaying the inevitable until the final minute.
In actual fact, most business owners with less than PS1M of annual revenue do not do any preparation at all. In the end, the final price for selling the business suffers. Whatever the reason you have for delaying making a choice to dispose of your business until you’ve got little or the time for proper planning, There are a few ways you can take immediately to boost potential value for your company.
If you think the buyer most likely to buy your business is a “strategic” buyer, then only a small amount of financial planning may be required. Instead, you need to create your company’s profile highlighting the aspects you believe are the most important to the attraction of this kind of buyer.
For instance, if you think a strategic buyer is more focused on your customer base, it is important to ensure that this section of your business’s records is easy to access and document. Even though a strategic buyer probably won’t be particularly concerned about your company’s financial situation, you shouldn’t forget to conduct a recasting exercise of your financial accounts to aid in determining the amount that your company can likely sell for in the market.
This can, in turn, give you an accurate estimate of what you can expect a “financial” buyer will most likely be willing to pay for your company. It can also serve as a benchmark for evaluating an effective buyer’s price.
If you believe that an ideal buyer for your company is a financial buyer (which is the majority of them), then recasting your accounting is vital, and so is the valuation.
If you believe that there are significant financial benefits you could implement if you had the time to do so, you must prepare an annual Pro-forma financial statement, including all improvements to revenue and cost reductions that you would have made in the event of time. The enhancements must be meticulously recorded and clearly described in the proforma as their potential nature.
Be aware, however, that Financial buyers tend to be opposed to the payment of future profits based upon projected revenue and/or planned cost-cutting measures that do not guarantee success.
It is possible to base your offer on your ‘out-year’ proforma projections and then settle on an agreed price that gets you close to that figure. Getting an investor to cover future profits is also challenging, and they’ll need to take difficult steps.
Whatever type of buyer way of selling you expect to receive when selling your business for sale without much preparation, you must make as many physical improvements to your company as you can.
This checklist serves as an overview of the short-term strategies to prepare your company for its eventual sale.
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Accelerated Business Sale Preparation Checklist:
Determine the most likely buyer and the most effective method of selling. Specific selling methods are more complicated than others; however, each scenario is so distinct that it is difficult to decide which one is faster. If speed is the main factor, then you should stay clear of more complex ways of selling.
Recast your accounts from the most recent year to reflect your final year of operation. (Note If you’re over six months in your fiscal year, you must create an income and expense projection statement to base to determine your value.)
Determine a liquidation price for your business based on the most recent financial data. Apply these findings to establish the baseline value of your business to help you determine an acceptable asking price.
Make immediate steps to implement the most non-financial business value enhancements and risk reduction strategies. These strategies will help you get an upper-end asking price for your company.
Analyze your company’s operation to identify revenue growth and cost reduction strategies you’d take if the opportunity was there.
If you can, prepare a one-to-three-year financial statement pro forma and calculate an updated value for your company based on projections made in the earlier step. Consider this value the price you are willing to offer for your company if you believe your projections are reasonable and could be “sold” to a prospective buyer.
Create as many company profiles as possible within the time frame. You’ve got to present a convincing prospectus of sales for your company. A Business Broker can handle this task on your behalf, and you might choose to trust Business Brokers for this. But, you’ll require gathering the required details to be documented correctly.
Create a team of experts to assist in your business sale negotiations. Also, engage an expert Business Broker or another competent professional to locate potential buyers for your company.
Making your business sellable without effort is basically the same as what you’d do in the event of more time. There are three main distinctions:
Making revenue-enhancing or cost-cutting modifications to your business is not advisable since they won’t show in your financial statements by the time frame you require to sell your business. Instead, you’ll attempt to “sell” these economic improvements with the help of an informal statement during your negotiation.
Other enhancements will be required to be speeded up. Still, there is a possibility that they might not be completed in the timeframe or in sufficient quality to positively impact the selling process and selling price of the business. So, try to make the best effort within the time available.
The process of preparing for the sale should continue If it is possible. Once you’ve put up your company for sale and begin talking with potential buyers, it is important to keep making the necessary adjustments and changes appropriate for your company. Finding the right buyer for your company might take more time than you anticipate. When the perfect buyer is found, you could have made many changes you didn’t think you’d have the time to complete. This will likely reflect in the selling cost of your business.