Here are some frequently asked questions by vendors of businesses:
What’s the one most important thing I can do to prepare my business for sale?
How long will it take to sell my business?
How much information do I need to disclose?
How can I help during the sales process?
What types of purchasers are looking to buy businesses?
Is there any one thing that most of these buyers are looking for?
How important is it to have things looking good when selling a business?
Why use a broker?
What’s the first step in establishing a relationship with a Bayleys business broker?
There are lots of things you need to do to ensure a successful sale which we have outlined in our Selling Your Business section. But perhaps of most importance is to start becoming the coach rather than the captain.
The most challenging business to sell is often one which is overly reliant on the owner/s for its success and where much of the knowledge, contacts and power base resides with them. Empower your staff to make decisions (even if they’re not always the right ones), feed them with information which makes them excited about the business’ future and want to be part of it and share VIP clients/customers among them. “Letting go” can be a hard thing to do but you may be surprised by how much easier it is than you think. Plan to make yourself redundant!
Businesses generally take time to sell – months rather than weeks and typically for a larger, more complex business the average sale time would be six to nine months given the amount of due diligence involved. However, we recently sold a $5 million-plus business at it asking price within two months so it depends on the circumstances.
Trying to sell in a hurry sends the wrong market signals and puts you in a weak position which makes it unlikely you will achieve the best possible price. However, diligently documenting and disclosing all information relevant to the business at an early stage may help expedite the due diligence process.
Be honest and tell it “warts and all”. Serious purchasers won’t be expecting to find a perfect business. If you lie about or hide something that a purchaser uncovers as part of their due diligence you either won’t have a buyer any more or will provide ammunition for them to ask for a reduction in the sales price. Get any issues on the table early.
Due diligence is a process whereby the purchaser is looking to verify everything they think they know or have been told about the business – not discover new issues that could affect the risk profile of their investment.
Buyers respect vendors who know their business and can talk knowledgably about it, and are more likely to respect their asking price. Be prepared to discuss profit and loss accounts from the previous three to four years, abnormal or non-recurring costs in the accounts, personal drawings, staff and any agreements that are associated with future maintainable earnings of the business.
Make the buyer feel comfortable. Briefly profile all your key customers, suppliers and service providers. Outline the major tasks in the business and how you handle them.
They range from hands-on business operators looking to expand their current operations through to investors after a well managed company that will provide them with a good return. Other business owners who are in growth mode in your industry are obvious potential purchasers, particularly if they can see an opportunity to add further value to your business.
Corporate “refugees” also make up a significant portion of purchasers – often experienced executives who have had successful corporate careers but who are looking at a change of tack for their remaining working years.
Business migrants, looking to secure residency in New Zealand by investing in a business here, are also an important source of buyers. Bayleys International personnel, who regularly visit offshore markets where there is strong interest in investing in New Zealand and participate in immigration seminars, provide a number of important leads and introductions to these people.
Most buyers are after a business with good future maintainable earnings and a low risk profile around those earnings. The lower the risk, the higher the price a business is likely to sell for. Businesses in sectors of the market with low entry barriers, where it is easy to start a business up, are likely to be considered the riskiest.
Businesses for sale are like anything for sale – presentation counts. Make sure the entire premises are clean and tidy, not just front of house. That includes the office, amenities and any storage/warehousing. A messy looking business often leaves a bad impression about how a business might be run and how management and staff regard the business.
Any business owner who has sold a business on their own will reluctantly tell you how excruciatingly long it took and how it was a stressful and distracting process. They also often get too emotionally involved and close to a purchaser to negotiate “hard” on price.
Every sale transaction has potential pitfalls. Bayleys’ business sales team will ensure your business is as prepared as possible for sale to minimise these and they are experienced in dealing with and overcoming any issues that crop up. Using an independent sales advisor also allows your company to remain anonymous during the early stages of the sales process, minimising disruption to your business and relationships with key stakeholders, suppliers and staff.
An experienced business broker can help guide you through the complicated process of selling your business but more importantly putting a professional business sales expert in between buyer and seller will yield a substantially better result and price. It also shows a clear intent to sell to potential purchasers, most of whom prefer to deal with an independent intermediary.
The very first step is to meet, to simply see if we can work together. The sale process is never an easy one and will require many meetings and conversations. Because we will become involved with you in this process, we all need to know we can work with each other before we go any further.
At the initial meeting, we will discuss how you wish to exit from the business, when, and how ready for sale it is. If possible, it is often best to do this at your premises so we can gain an overall impression of the business. If this is not possible due to confidentiality we can meet at our offices or elsewhere.
From an individual perspective, deciding to sell a business is a major decision which may signal a complete change in lifestyle. That’s why we give your personal agenda as much importance as your business objectives in the way we market a property and structure a sale.