19 Aug Top 4 Tips to Maximise the Value from your Business Sale
With over 100 years combined experience dealing with accounting, business, and tax our team here at Grow have seen many successful (and unfortunately many not so successful business sales). The following top 4 tips are what we have observed as being the difference between achieving a good outcome or not.
Tip 1: Always Seek Advice.
By a long way, the common defining feature of good result from a business sale (and purchase) is seeking advice. Not just from a good accountant but also from a good lawyer and business broker. Combined, those three specialists can ensure you achieve the best outcome.
Tip 2: Haste Makes Waste
The best time to think about selling your business is often the day you purchased it so an exit strategy can be considered and the future sale will remain on the agenda.
Successful business sales are built upon a great story and financial statements that match that story. We understand our business clients will seek to pay the least amount of tax legally possible and that necessarily means minimising reported business profits. When it comes time to sell your business though you will want the profits to be maximised. That profit conflict is something that can take time to properly manage (at times one or two years) so talking to us early is critical.
If you must sell your business in a shorter timeframe, then speak to us about how we can present your financial information in a different way to support your price expectations.
Tip 3: Review all Contracts
Business value is a combination of profits and the buyers perceived risk. Tip 2 increases your profit but reducing the perceived risk of the business for a buyer can also add significantly to the value of your business. Reducing the buyers perceived risk is achieved by helping the buyer remove any uncertainties from the business once it is handed over. This can be achieved partly by reviewing any supply or customer contracts you have in place and making sure as far as possible that they are beneficial for your business and can be easily assigned to the buyer.
Talking to your suppliers and customers early without giving away too much information about your plans can be delicate but the pay back should make it worthwhile.
Tip 4: Consider Your Lease
A long term lease will give a buyer confidence they will have premises for the business but that may not work if a buyer is likely to want to relocate the business. The other aspect of selling a business with a long term lease in place is the risk for you as the seller. It is almost certain that your lease will contain a Personal Guarantee for unpaid rent and any termination obligations or costs. For you, that will mean a longer period where you have effectively underwritten the landlords investment in their property.
On the other hand, a shorter term lease reduces your risk but exposes the buyer to increased rent or the lease not being renewed at all. The ideal outcome will depend on your business and your specific circumstances, but often a discussion with the landlord early in the process is worthwhile to ensure there are no surprises when the buyer has a discussion with them.
Selling your business is a big decision and it’s probably a good bet your business is not so special that it will simply sell itself at a premium price. This makes planning early for the sale of your business even more critical to maximising the value outcome and successful transition to the new owner.
Even if you are only thinking about maybe selling your business give us a call (07)5448 9600 and have a no obligation chat about your options.