"Start with the end in mind." 

That’s the key to selling your business for its maximum value.

Too often potential buyers are ‘scared off’ by too many unknowns during the due diligence process --  there is too much risk in the unknowns. If you ‘start with the end in mind’, you are more likely to get that premium sale price you are after.

Understand the Value Gap

The good news is it is never too late to start planning for the sale of your business -- you just need to understand the Value Gap.

The Value Gap, put simply, is the difference between your aspirational sale price and the value the business would sell for today. Understanding this gap can be intimidating; however, once you know this you can start putting steps in place to better prepare the business for sale and achieving your premium price. Talk to your accountant to begin understanding the value of your business and discuss ways to improve your businesses premium sale price.

Make the invisible, visible

Whether you plan to sell your business now or in 10 years time, you should be aiming to make the invisible, visible. Imagine someone you don’t know is coming to operate your business for 6 months while you are on holidays and you can’t be contacted. Get everything out of your head and into a document. Create a manual for everything you can think of -- right down to how to answer the phone, or how to take customer orders, how to create leads, how to convert leads to sale, how to produce your product and how to deliver the finished product, how to collect debts and even how to make the perfect coffee. The facts are, the less your business is reliant solely on you, the more comfort a potential buyer has. And the more comfort a buyer has, the more likely you are to achieve your desired price.

Relationships

A handshake is not worth much when it comes to selling your business so you need to put contracts in place with your customers. Even better, if you can lock your customers into long-term contracts, your business value will increase and prove very attractive for a prospective buyer.

You will need to do the same with your staff and suppliers. You should put together an organisation chart highlighting the management lines and roles within the business. All staff should have clearly documented roles and responsibilities.

In addition, creating a schedule of suppliers with agreed payment terms will assist a prospective buyer to understand who you are purchasing from and what purchasing power you have (if any) so they can better manage their cash cycle should they decide to buy the business.

Financials

Arguably the most important part of a prospective sale is the finances of the business. If the numbers don’t stack up, no one will be interested in purchasing the business. Great record keeping de-risks the business in regards to a sale, so if you have great accounting records, such as real time reporting on profit and loss, budgets, and balance sheets, you will go a long way to helping a buyer understand the value of business and what the return on their investment will be.

Get in the professionals

Once you have your "house in order" so to speak, you should be in touch with your advisors to assist in the sale of your business.

You will need your accountant to help you value your business and understand the tax consequences and concessions available when selling a business. You can also work with your accountant to get a ‘Due Diligence Package’ that will have you better prepared for potential buyers questions around due diligence, so you can respond quickly and comprehensively.

A solicitor will need to draw up the contracts of sale of the business and negotiate terms on your behalf, which may protect you in the long run. Don’t hesitate to get them involved and make sure you are clear on the terms you are agreeing to and signing off on.

How to sell your business

Finally, you will need to decide how you will sell your business. The cheapest option is to find a buyer yourself. This may be a customer, supplier, associate or an old friend. Social media is a powerful tool these days and makes it easy to reach many people. Don’t be afraid to reach out to your networks.

For a more targeted and less hands-on approach, you can appoint a Business Broker or Corporate Finance Accountant to put together a sale document or Information Memorandum. This will position your business in a very attractive way and make it more likely for you to reach a buyer that will see the value in your business.

Both a business broker and a corporate finance accountant can act as your agent when selling a business and will therefore field all enquires and negotiate the transaction on your behalf. Naturally, they will charge a fee which is usually a success fee as a % of the sale price. You will need to negotiate and agree on a fee prior to the engagement. However, don’t be anxious to offer them an incentive if they can exceed your expectations.

It’s never too late to start planning your business for sale and when you operate with the end in mind, you may just get that premium sale price you have been dreaming of.

Good luck!!