Selling a business is a major event which can have a significant impact on your financial wellbeing; you can only sell it once so getting the maximum return for all that hard work is vitally important. So what steps should you take to achieve its full potential?
Inevitably, business valuations start with the financials, so to get the best sales price you need to show the best numbers you can.
First and foremost when selling a business is demonstrating earnings potential – this is the profit the new owner can expect to generate. Ideally, profits need to be maximised for at least three years before your expected sale date and show a consistent return, so the sooner steps can be taken in this area the better.
Secondly we have the balance sheet value. This is all about the financial strength of the business, measuring the assets (what it has) against liabilities (what it owes). To give the best view possible, make sure creditors are paid on time, cash is collected from customers, and stock doesn’t sit on shelves gathering dust!
But a business isn’t just about the numbers; much of its true worth consists of ‘intangibles’ – those extras that don’t get recorded in the accounts. This can include its people and its processes, as well as its market reputation, brand image and intellectual property.
Because they’re more difficult to value it’s easy to overlook them. To avoid this trap, make sure every aspect of your business is clearly documented; your contracts with customers, suppliers and staff are up to date; and tie up any loose ends that might cause the buyer to think again.
Finally, an offer could happen at any time, so start preparing now for what could be the most important financial transaction of your life.
After all you never know what’s round the corner!
If you need more detailed advice, schedule a call with one of our staff and we’ll help as much as we can.