10 Must-Do Things Before Putting Your Business Up For Sale
The conversations we haver regularly with individuals who are looking to sell their business or franchise are fascinating. When someone arrives at the decision to sell their business, it’s not the easiest. It can be emotional and stressful, but when prepared and organized properly, it can be life-changing! We came across this terrific blog from one of our sellers! Have a read:
Buyers want profits-not revenue. Many business owners trying to sell their business price it and focus on the business’ revenue. Does it really matter if you have growing or good revenue but no or little profit? No. This brings me to point number #1. Do everything you can in the year prior to selling to show more profit and one good way of doing this is normalizing your financials. Normalizing is taking out all the personal expenses, one time items etc. from your financials to show a better EBITA.
Price your business accurately. When we talk to business owners and ask what the selling price is of their business I hear all kinds of crazy formulas and justifications. Selling a business is a daunting task filled with lots of hard work and time requirements. The owner should be focused on running and growing the business and will certainly look smart to buyers when they retain outside experts to help them sell their business. It shows buyers you know you are not an expert in everything and are willing to reinvest back into the business to get a desired result. If you do not know how to price your business -get help. A professional valuator, business broker and some Accountants that specialize in this field can do so.
Stop doing cash deals! I know - I know, you hate this one if you do cash deals no buyer will pay for something you cannot prove! The year prior to, put all the revenue through your books with contracts. You may pay a little more in taxes but bottom line is every dollar of profit from that cash could be worth 3 or 4 times in the selling price. Any buyer worth his salt or his/her lawyer will include an offset clause in the purchase agreement. This basically says that if after the sale, any items/revenue/statements etc. are not 100% accurate, the buyer can discount payments on the vendor take-back loan or take legal actions against the seller. So you want your books in proper order and assets working as advertised!
Determine if a share or asset sale. Feel like a broken record here but if someone buys your shares you get a capital gains break but new owner gets all history of the shares, lawsuits, CRA problems, labour Board etc. etc. No one wants to buy your shares so you need to figure out this prior to listing it! Nothing scares away good buyers when they see share sale.
Operations Manual -Start Systemizing. Again, broken record but start to document how you do things at your business. As a long time EMyth fan and now EMyth coach, documenting systems will have a profound effect on your business and allow you to sell it for more. Many buyers are looking at franchises - why -because they have systems! A great we use here. They have lots of great how to videos on you tube as well.
Sell assets prior to the sale. If you have assets worth quite a bit of money, you may want to look at selling them now to generate cash for you or the business and then rent the equipment on the go forward. As long as renting does not disrupt your profitability too much. When selling valuable assets to a new buyer - you may not get the value you could today!
Check and improve your online presence. If you have a website, Facebook page, LinkedIn, Twitter etc. - give them an honest review and make sure you or someone in your business is getting contact forms and emails from said social media sites. All buyers will check out your social media and send in more info/contact forms. I cannot tell you how many times I have done this with no response or a week later-too late! Even some of the larger businesses we have sold ($8 million range) have had terrible websites that do not capture visitor information. Buyers want to see that you are actively managing these sites and using for marketing purposes.
CRM-Customer Relations Management Software. If you are not using a modern CRM program to track clients, leads, contracts, tasks, sales reminders you need to! Programs like Salesforce, Zoho, Keap/Infusionsoft are key to have in place to show buyers you have all the details you need for your client details and sales leads. What is a CRM program. I am often shocked when I see a business owner trying to run a business WITHOUT a CRM program. Most are dirt cheap to free, and easy to use. I once met a marketing leader of a $5 million dollar business who was using a bankers box with 30 folders in it to track leads, and calls and follow-ups - I felt like I was time traveling. To say the least, she was pretty incompetent and was finally removed!
Email Marketing Software. If you do not have all of your clients email addresses as well as leads that are or were interested in your product/service - start collecting them. Again amazing how many business do not do this and they are really missing a HUGE opportunity. We helped one contractor get out just 70 emails to his leads and he received 4 leads which 3 converted into over $30k in sales. AGAIN buyers want to see you are on the ball. When you are asking for a fair price for your business, this type of marketing lowers the risk to the buyer. You can actually measure results from your marketing efforts.
Be patient. Rome was not built in a day and you will not sell in a day once you start the process.
From The BizON Blog Team!
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