By Scott Brown
Selling a small business is a big step – but if it’s time to move on it’s worth doing so gracefully. There are many ways to go about it. A full sale to a private investor or competitor lets you make a clean break; a partial sale will enable you to retain a stake in your business and continue to profit off it, and reassure potential buyers that you aren’t fleeing a sinking ship; a sale of assets can let you offload parts of the business a la carte; you can even, with a sufficiently wary buyer, agree to stay on for a time and sell the company in instalments.
So how should you sell your business? There’s far more to it than the method alone.
Identify your motive
Now, of course you know your real motive for offloading your business. It might not be more complicated than having made enough money out of it, becoming tired of it, or simply retiring, but when you’re selling a business, you also have to sell your reason for selling the business. Anyone looking to acquire your company will want to know.
So work out your line of reasoning before you take meetings with potential buyers. If you’re moving abroad, explain that – as gut-wrenching as it is – relocating your business and adjusting to a new tax system and a new market is more work than you want to do at this stage of your career. If you’re looking to bring in new investors for growth, tell them exactly how and why a co-owner is necessary to realise this vision.
Know when to fold ‘em
Accordingly, it’s wise to make sure your business is in good shape before selling up. A financially strong company with a solid sales model is a better prospect for a would-be buyer or investor than a company that’s floundering or stagnating.
If your business registers greater profits during summer or winter, sell then. If you’re on the cusp of winning a giant, coffers-boosting client, wait until the transaction is complete. Carefully plan what you will tell you staff about the sale and make sure you pick the right time to tell them. Making them nervous or unhappy is likely to have an effect on morale – and if valuable workers leave before the sale, it could diminish your business’ value.
Divest yourself of long-term assets
You don’t want to make long-term investments if you’re intending to sell up. This is common sense, but you want your balance sheet to be comprised of short-term, attractive, buyer-enticing profits, not liabilities.
Don’t cut and run
If you’re present for the handover, it will reassure potential buyers that any transition will be smooth and orderly. Being there to help in an interim capacity – enough time to coach the new business leaders, to reassure your soon-to-be-former employees that they’re going to be okay, and to reassure clients that they should expect no decline in overall service – can do a lot to calm nervous investors or buyers.
Prepare for negotiation
It’s rare indeed for a business and a buyer to agree on a reasonable sale price – at least, at first. Compromise should be your watchword: don’t expect to receive your initial valuation, but don’t settle for less than your company is worth.
Selling a business is often made out to be either simpler or more complicated than it really is. Go in with a full awareness of what’s involved – from a commercial, logistical, and legal perspective – and you’ll have a much better chance of completing the transfer of ownership successfully.
By Scott Brown is MD Sable Accounting