Selling a business on your own isn’t rocket science, according to Shyloh Gardiner, who sold an online business last year.
She approached a broker, who told she would get $20,000 if she was lucky for her online fashion boutique. But she did a little research and managed to sell it herself for $55,000. Gardiner says the research wasn’t hard. She spent a few hours searching the internet to understand the guiding principles of selling a business. “I believe if your business is set up right from the beginning, then when something happens and you want to sell just like me, you’ve already done the work. There’s nothing worse than deciding you don’t want your business anymore, then having to work for a further six months getting it ready,” she says.
There are many Australian business owners either considering selling their business, or already have it on the market and are waiting for that elusive buyer.
But making sure the business is actually ready for sale can make or break the process. Simon Merchant, founder of business appraisal tool, The Merchant Report says a lack of preparation for sale in today’s heavily weighted buyer’s market can dramatically extend the time required to find a willing buyer, or even render a business unsaleable.
“Firstly, as a business owner, reach out and use those affordable tools that can help you understand the current market value for your business, and understand the strengths and weaknesses that exist in the eyes of a buyer,” Merchant says.
Buyers will question how long the business has been established, how long the owner has been running it for, income and gross margin trends, how much the business relies on the owner, and how reliable it’s systems and procedures are, he says. “Be objective and conservative when deciding if your business is ready for sale. Many strengths of a business can be enhanced, and weaknesses mitigated by creating a very simple SWOT analysis and action plan for implementation during the time you can afford yourself prior to market, many at little expense.” Merchant says that one of the most overlooked issues when preparing for sale is the security of tenure, particularly if you are leasing your premises, he says.
So, be sure to check when your current term expires and what arrangements are in place for options to be exercised, he says.
“You’re selling a going concern, and buyers will look to avoid as much risk to their future earnings as possible. Two buyer segments that are growing across Australia today are the baby boomers and redundancy beneficiaries. If a business can offer lifestyle and security, then we should see buyer competition rise again in 2014.”
Before hanging out the For Sale sign, Gardiner recommends that business sellers firstly ensure they’re attracting the right customers, look at time management, outsourcing and your selling techniques and systemise everything in your business. “You need to systemise, test and measure everything. You need to be able to prove to the new owner that it works, and have proof to show them. Remember, you can’t sell what’s in your head. So write it down so you’ve got a manual with everything in there for the new owner