Preparing Your Business For Sale: 3 Must-Knows
When looking at preparing a business for sale, it’s not just the months ahead of such a process that are important, it’s the years leading up to the sale, according to the experts.
So where do you start?
Clark Butler, a Sydney-based lawyer, corporate advisor and investor says there are three things you must know:
Know your business
“Ideally, you should have your business in a fit state to sell at any point.”
Butler says that once you begin thinking about selling, the more work you do in advance, the more any potential problems are eliminated.
“Most privately-run businesses are not in a fit state to sell, and that’s not because people are slack, it’s because you’ve got better things to do than worry about your company register, and whether your assets are all in the right entity and the like.”
Butler says that ‘getting your house in order’ is the best way to prepare and whilst almost all businesses have parts that need tidying up, these loose ends inevitably slow any sale process down.
“A messy business will be more difficult to sell.”
Know your price
A crucial, yet often overlooked and tricky issue for business owners for which Butler suggests a two-pronged approach: know what you will sell for and do your industry research.
“You’ve got to be very clear about what you will sell for and what you won’t, and you have to do a bit of price discovery yourself,” says Butler.
That price discovery involves looking at what comparable businesses in the same industry are selling for, asking people and looking at general and pertinent market conditions.
Furthermore, if you’re the CFO, then your job extends further. It’s not just about knowing the sale price, says Butler, but in convincing the owner what the right price range is. An owner may need to be prevented from going ahead with the sale process unless they’re being realistic about the price it will fetch, he says.
Know your buyer
The majority of smaller businesses are acquired by buyers who have known of the business for a period of time, says Butler.
“Mostly you’ll know who’s going to buy your business,” he says.
Larger businesses attract financial buyers that will have ‘knocked on the door’ for a while, so there’s that chance to know a bit about the buyer in that instance also, Butler adds.
Clark Butler has more than a decade’s experience as a corporate advisor to a range of companies in the technology sector. He is currently the interim CEO of Dun & Bradstreet, Australia and New Zealand, having taken on the role when the private equity firm in which he is a senior partner bought the company in June 2015.