Things to consider when -
Listing your business FOR SALE
Ask yourself these questions first before you prepare your business for sale
Answer these questions
Make sure you really “want” to sell. Ask yourself if you are bored, burned out, ill, have a new child, have aging parents that need your assistance, etc. Or are you simply unhappy with how much money you are making? If this is the case, you may not “need” to sell. All you need is some guidance getting back on the right track.
An experienced Business Broker can help you refocus and see the forest for the trees. You might find out that once you start making enough money, you do not want to sell after all. But if you conclude that selling is what you want to do regardless of how much money you are making, then you need to proceed to the next step.
After You are 100% sure that you want to sell your business
The following information is a guide and not everything may apply to your business. However, it is safe to say you can never have too much documentation to verify your business.
Not all Buyers will carry out a complete due diligence, it generally depends on their knowledge of your industry, the size of the purchase and the risk factors of the business and their intentions for the business.
The property you operate from : I suggest that you drive up to your business and determine the following if they apply to you. Are there any issues with the property eg holes in your parking lot, dead shrubbery, are the windows dirty, is the building exterior dirty, is there painting to be done, does your sign need maintenance, make sure the “curb appeal” of your business has no obvious and easily correctible issues. Check each room inside remember that when the Buyer tours your business, you want them to visualize becoming the owner and being proud to do so.
Let’s look at the People : After you have fixed the interior “physical” issues, it is now time to look at job descriptions, policies and procedures. First and foremost, you need to draft your own job description that covers what you do daily, weekly, monthly, quarterly, semi-annually and annually. It should be very detailed, and I recommend that you dictate it to a secretary or temporary employee who can take shorthand and type well. Make certain you have someone proof read the job description and correct any grammar or spelling errors.
After you are satisfied with your job description, ask all your employees to do the same. This process has several benefits. First, your employees will see how much they actually do. Second, it will give you a chance to see if they are doing what you think they are doing. Third, it will tell you whether they are doing what they should be doing.
With regard to employees, you need to cover hiring, evaluations, probations, vacation, sick days, holidays, etc. If your company has positions where employees must have special licences or qualifications, background checks, drug tests, reference checks, etc., you need to have these documented. When all the job descriptions are complete and typed, place them in a 3-hole binder labelled “Job Descriptions.” Employment records should be filed alphabetically.
A prospective Buyer will most certainly ask about employee turnover and employee length of employment or whether you have any “problem” employees.
How does the business operate : This is how the business operates. How things are processed, operated, ordered, handled, maintained, checked, administered, line of command or operation. This documentation shows a process and how things are organised and operated. Done well, a policies and procedures manual leaves little to the imagination or individual interpretation and really makes a successful business more desirable.
Ahhh, the financial statements, what to have available: Nothing frustrates a prospective purchaser more than asking for current financial statements and tax returns and being told that they are not available. Worse yet is being told that a date cannot given for when they will become available. Talk about red flags. As a business owner, you must anticipate the purchaser’s questions regarding all financial matters and have current statements to defend your answers.
When I say financial statements, most people think of a profit and loss statement (also called the income statement.) But the balance sheet is equally important. The combination of these statements tells you whether a business is losing money and gives you a picture of the company’s financial health. Buyers also look to BAS statements to check on the verification of business sales. Make sure you tax returns and BAS statements are up to date. While we are on the subject of taxes, you need to have a heart to heart talk with your accountant regarding capital gains tax when you sell your business, there are certain conditions that can minimise this tax.
The Buyer will generally require verification of all that you provide: This is due diligence and how do you prepare for it? Due diligence is the process where the buyer looks to validate everything you have represented both verbally and in writing. The buyer will scrutinize your financial records, your legal records, your employment records, etc. With financial records the process starts with the tax returns, goes backwards to the financial statements, goes backwards to the general ledger, goes backwards to all source documents that include bank statements, deposit slips, check stubs, cancelled checks, vendor invoices, client/customer statements, etc.
To prepare for the financial side of due diligence you should assemble tax returns, financial statements, general ledgers, bank statements, deposit slips, check stubs, cancelled checks, vendor invoices, client/customer statements, etc. for the last 3 years. Tax returns, financial statements and related items should be in date order from the most current to the oldest. Vendor invoices and client/customer statements should be in alphabetical order first and then in date order for each vendor or client/customer.
There is a legal side to the due diligence process as well. Are you a valid legal entity such as a sole trader, partnership, company or trust? Do you have outstanding liens for debts that have been paid off? If so, you need to contact the creditor and ask them to remove them. If this is not done, the purchasers solicitor will have to withhold funds in escrow or postpone the settlement until the actual status can be determined.
Is there any outstanding litigation that affects you as either a plaintiff or a defendant? Are all your employees legal, and do you have proof? Are there any patents, trademarks or service marks that need to be protected? Do you have any contracts with vendors or clients/customers? Supporting documentation on all of these items should be provided.
HERE IS A SHORTCUT TO SELLING YOUR BUSINESS
JUST CALL ONE OF THE BUSINESS BROKERS NETWORK AUSTRALIA MEMBERS LISTED ON THIS WEBSITE THAT IS IN THE STATE YOU ARE IN AND SAY,
'I WANT TO SELL MY BUSINESS' The Business Broker will take it from there
Feel free to call one of the Business Brokers or Business Valuers to discuss anything about your business. Confidentiality assured.