Selling your Business in 2024 requires preparation and planning to ensure the best results. There are some key factors that will enhance your exit strategy. Below is a comprehensive list of items to consider.
Are you Prepared to Sell Your Business?
When it comes to selling your business, the key to a successful sale is being proactive, getting ready ahead of time. You don’t want this to be a last-minute decision made out of desperation. Instead, make it a planned and anticipated phase for your business.
Quick Checklist – Proactive Preparation Exit Strategies include:
- Ensure that all financial information is up-to-date and readily available for potential buyers.
- Double-check that all company books, documentation, and corporate records are in order.
- Make sure that all tax and government returns are complete and filed on time, including BAS payments.
- Review agreements, contracts, and any other obligations to ensure they are current.
- Go through the licenses and permits required by your business. Any expiring licenses are a problem that needs to be resolved. You also need to check the assignability status of current licenses or permits.
- if you’re on-selling a Franchise check the Franchise Agreement for any sale terms. You’ll need to follow anything written in the contract and keep your head office informed.
- Being mentally prepared and emotionally ready to let go of your business
- Consider the condition of the equipment (tested and tagged) and whether you need to complete a full stock take for accurate reporting
Conducting a thorough review before listing your business on the market will not only increase its value but also prevent any unexpected issues during the sale negotiation and you will be well-prepared for selling your business in a professional manner.
Hire a Team of Experts: Business Broker, Accountant, and Solicitor
When it comes to selling your business, partnering with a reputable team is absolutely essential. Your team of professional advisors should include a Business Broker, Accountant and Solicitor.
The Business Broker
Their expertise in the current market and deal negotiations can be an invaluable asset. With their guidance, you’ll navigate the complexities of the process and make informed decisions every step of the way – from listing your business for sale through to final settlement.
Your dedicated broker will not only professionally market your business but also screen potential buyers so that you can focus on running your business while building trust with interested parties.
If you are selling a Franchise Business, employ a Broker that has proper experience in this field. There are many additional steps in the sale process that a Buyer must make to successfully purchase your Franchise.
In addition to a skilled broker, having an experienced accountant by your side is crucial. A knowledgeable accountant who can provide clarity and transparency regarding your business’s financial documentation is crucial. They will handle all the technical aspects related to taxes and financial history – ensuring everything is in order for a smooth transaction. Remember: In business sales, there’s no room for “but…”. The figures are crucial when it comes to selling your business – they either make or break the deal. The Accountant can prepare a set of figures specifically tailored for sales purposes. This will ensure accurate representation and strengthen buyer confidence in financial matters.
Furthermore, a knowledgeable solicitor will provide legal advice throughout the sale process and represent your best interests during contract negotiations. Their expertise will give you peace of mind knowing that all legal aspects are taken care of.
To maximize your chances of achieving a successful exit, it’s imperative to thoroughly review key areas of your business with your advisors such as intellectual property rights, employment matters, health and safety compliance, and tax obligations. This proactive approach will help identify and give you the opportunity to fix any potential issues that may arise during the sales process. A qualified Business Broker will be able to recommend Solicitors and Accountants with commercial business sales experience.
Other Selling Your Business Exit Strategies include:
Assess and Enhance Business Value
Consider ways to enhance the value of your business before entering the market. This may involve addressing operational inefficiencies, strengthening customer relationships, or investing in strategic initiatives. The goal is to present a business that is not only profitable but also positioned for future success.
Build a Competent Management Team
If possible, try to build a strong and capable management team. A well-equipped Manager or Senior Staff member can handle operations independently, assuring potential buyers of a seamless transition. A competent management team is an attractive asset for those looking to acquire a business and adds immense value to your business.
Diversify Revenue Streams
Reducing the dependency on a single revenue stream or a handful of key clients enhances the stability and attractiveness of your business. Diversify your customer base and explore new markets to showcase the potential for sustained growth under new ownership.
Understand Buyers Perception of the Covid Pandemic
Potential buyers focus on finding businesses that have consistently generated profits over time rather than relying solely on the exceptional profits seen during the COVID-19 pandemic. As such Buyers will request to review financial figures from 2019, 2022 and 2023 figures to assess sustained profitability, disregarding Covid years when making their decisions. Therefore make it a priority to highlight any profit retention strategies and new markets that were discovered during the pandemic.
To gain a better understanding of how buyers will view the financial results of your business and determine the best time to exit, consult with a reputable Business Broker who can provide a market appraisal and guidance.
Are your Business Premises Owned or Leased?
For many small businesses, their location is essential to their success and performance so a buyer will want a strong lease in place with options. For other business models and for Owner-Occupied Business Owners the lease is less important and negotiable between parties to the sale depending on the circumstances. Sometimes the Buyer prefers a lease that is ending so that they can renegotiate directly with the Landlord. A buyer obtaining bank finance will need a reasonable lease tenure to secure the loan. There are many different scenarios that occur and impact on how a lease affects a sale.
Vendor Finance in 2024
To ensure you attract a wide range of potential buyers, it’s worth considering your position on vendor finance. Given the current tight lending landscape there is an increasing need for flexibility in transactions involving vendor finance terms as part of the financing arrangements. Discussing this with your Business Broker before selling can provide valuable insights into the advantages and considerations of providing vendor finance.
Selling Your Business from the Buyers Perspective
This is an exercise that comes in handy at different stages of the sale but particularly while preparing your business for sale. Ask yourself some important questions:
- Would I be prepared to pay for my business what I want the buyer to pay? Why or why not?
- How does the Buyer view my business premises? Is it clean and tidy or need decluttering? Is the signage adequate, does the outside garden need attention? Could I repaint the premises or install new floor coverings?
- How old is my equipment? Has it been maintained regularly, upgraded as needed? Will the buyer need to replace my equipment within 2 years of purchase and then factor this into the price they offer?
- What are the real opportunities I could be taking advantage of to increase sales? Should I try to map these out or implement one of them prior to sale? How will the buyer view missed opportunities I have not taken advantage of? Would I pay more for a business for untapped potential opportunities that may not be real or newly implemented opportunities showing promise and generating increased sales?
Considering How you will maintain Your Business during the Sale Process
On average selling a business takes 3 to 6 months from the time of listing to receiving an accepted offer. This is provided that the business is priced and marketed correctly. Once this milestone is reached, the process of preparing and executing the contract as well as settling the transaction, typically takes around three to four months. However, there are certain factors that can extend this timeline. For instance, if there is a lease assignment involved or bank finance needs to be secured, the process may take longer.
Moreover, if your business operates in a niche industry or in a regional area, it could take anywhere from 12 to 18 months to find the right buyer. On rare occasions the entire process is completed within 3 months. While these timelines serve as general guidelines, it’s important to keep in mind that every situation is unique and can vary greatly depending on various circumstances. Therefore, when considering selling your business, it’s important to factor in these potential timeframes into your family situation and overall circumstances for proper planning and decision-making purposes.
While your business is on the market it is crucial to maintain steady sales growth. Operate in a “business as usual” mindset. This will maintain the value of your business rather than allowing it to decline. Nurture strong relationships with both employees and customers while continuing all regular advertising and marketing activities.
Taking care of yourself during this time is crucial as well, selling a business feel overwhelming at times so finding effective coping mechanisms that work for you is another key consideration. If you are not operating at your best, it could potentially impact the performance of your business. Therefore, practicing self-care is another vital aspect that shouldn’t be overlooked.
For additional information and resources on selling your business in 2024 the Queensland Government offers many resources on their website. This includes events and mentoring, hotlines for assistance that may assist you with your preparation.