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Well run businesses are the easiest to sell

Tags: Commercial

Selling a business successfully is in many ways no different to running a business successfully.

So says Wayne Scurrah who has worked at a senior management level across many different business sectors and joined Bayleys’ Business Sales, Hotel, Tourism and Hospitality team as a senior broker earlier this year.

He has had considerable experience in selling businesses including the Soul Bar & Restaurant, of which he was a director.

“There is no doubt that running a business successfully and professionally very much assists in its preparation for sale and achieving the optimum outcome in selling that business,” says Scurrah.

He lists some of the key ingredients to operating a successful and profitable business, which will assist in a sale, as:

Detailed Financial Performance and Records

• Achieving a consistent pattern year-on-year of profitable revenue growth.
• Controlling costs that ideally decrease as a percentage of revenue as the business grows, and having a clear understanding of those costs so every dollar can be accounted for.
• Regular cash flow reports which show where income is coming from and where it is going.
• Persistent management of debtors.
• Budgets in place for the current year, with year-to-date progress measured through monthly accounts and year-end forecasts updated periodically.
• Longer term plans (3-5 years) showing profitable growth and explaining exactly how this will be achieved.
• Completed and audited accounts for previous years.

The Right People

• Having a great high performing and stable team in place.
• Ensuring the management team is competent – regardless of ownership.
• Ensuring a positive workplace culture exists.
• Having appropriate structural charts, HR manuals and employment contracts in place and fully up-to-date.

Knowing Your Market

• Understand your client base, have excellent relationships and where appropriate supply agreements in place.
• Know your product offering, distribution channels, competitive advantage, margins and areas of risk and upside.
• Have a thorough knowledge of your competitors.
• Have an up-to-date SWOT analysis on your business.

Ensuring key operational procedures are documented

• Ensure procedures are clearly systemised and documented into an operations manual.
• Detail annual repairs and maintenance and capital expenditure plans.
• Ensure all licence agreements, leases (plant and buildings), insurances and other contracts are current and appropriate.
• Have a detailed workplace health and safety policy which demonstrates the business is meeting its legal obligation in this area.
• Have a long-term strategic plan that shows the business knows where it is heading and has scope for further growth.

“The more boxes you can tick in this check list, the more saleable your business will be,” Scurrah says. “In a perfect world all of the above – and more – will be in place both while you operate your business and also when the time comes to sell.

“In reality of course that is quite often not the case, which doesn’t mean the business still can’t be readied for sale and a good outcome achieved. A knowledgeable business broker will be able to advise and assist with this.

“Quite often prospective buyers are attracted by improvements that could be made and the potential for growth when assessing a business.”

Scurrah says with discretion and confidentiality often paramount during the sales process, making dramatic changes in order to be fully sale ready may also alert competitors, clients, suppliers and staff to the fact that the business is on the market.

“The bottom line is planning for the eventual sale of your business should ideally begin well in advance of the sale date, and in many ways from the day your first acquire or start it,” says Scurrah. “A company with a history of being well run will be more saleable and reward the owner for their years of hard work and investment.”

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