When do I Sell my Business?
When do I sell my business?
Possibly the hardest question you will ask – after “Will you marry me?”. It starts with a self-nagging feeling; in the pit of your stomach; at the back of your mind; it keeps you awake at night (probably between 2.00 am and 3.00 am) – the thoughts start zig-zagging around your head – and you don’t know how to put these feelings into words.
You have put all your energy into creating your version of what you want as a business; you have applied your previous experience to create a product that you believe is what your customers want; you have wrestled with yourself that you have chosen the right location for your business – and you have built it up into a viable business and yes… you have succeeded in achieving your dream of being a provider and proving to yourself and to those who love you that YES! I DID IT.
But what happens now? Do I continue in the same way I have for the last few years and brought me my success? Do I capitalise on what I have created? What do I do from this point forward? Can I repeat my success somewhere else whilst enjoying the professional challenge? These are questions that you regurgitate before you start thinking about an Exit Strategy. And believe me, you really need an Exit Strategy because wanting to sell from one day to the next is fraught with so many dangers.
In wanting to sell your business you need to prepare the business and yourself for the future. The business you have created will always be worth more - in terms of Dollars – to you than it would be to anybody else. You know how to extract every last cent from the business and that means undisclosed cash takings. But you can’t just decide from one day to the next that the business is for sale. You have to present your business in the best possible light to any prospective purchaser – and this is where an experienced Business Broker can be a great help. In preparing your business for sale, you have to be prepared to conduct severe due diligence on yourself and all that you represent.
This includes:
- Your Lease – are you abiding by all terms and conditions contained within your lease? Is your lease comparable to the market for your location? Does your lease contain a demolition or relocation clause? Is your annual rental increase sustainable? How many years on your current term and how many years of options do I still have? This becomes important because the length of the lease and the profitability of your business correlate with the selling price.
- Your Development Application – are you abiding by all the terms issued by your local council including hours of trade; numbers of employees;
- Staff Roster and Appropriate Wages – do you have a roster of how many employees work in a section at any one time – when an employee starts and finishes their shift – how much is the employee paid for that shift including Penalty Rates if applicable. Do you pay your staff any cash in hand – or non-declared wages from non-declared income? Do you pay any staff benefits for which a Fringe Benefits Tax may be applicable? Uniforms and Training?
- Trading Accounts - Do your Profit and Loss accounts for the last three years match the Tax Returns for the last 3 years? Does the BAS for the last 3 years match your stated income? Do you have any personal expenses in your Profit & Loss accounts that have been claimed as legitimate business expenses?
- Your Business Plant and Equipment - Is your business looking as good as it physically can? Does it need painting? Does it need repair? Is it clean? Is all equipment working well? Is the Kitchen Extractor Fan working efficiently? Has the Grease Trap been cleaned regularly? Do you have invoices available to prove these services? If you have a garden – does it look neat and pretty? Have all footpaths and passageways been prepared to prevent slipping? Are the windows clean? Are the toilets clean?
Selling a business is harder than selling a house. There are so many more moving parts that need to be considered before you go to market and all of these features mentioned above work in some mysterious algorithm to produce an eventual marketable selling price – a price at which you can justify the asking price – and importantly a price which can withstand due diligence by a purchases financial and legal support team.
So ask yourself – am I ready to sell my business? Do I really want to sell my business? This in fact may be a harder question than asking somebody to marry you.
Tags: selling
