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Selling your Business
Selling a business can be a long and difficult process. However with the correct guidance you can sell your business in a way that can help it to grow and prosper in the future.
At the same time, you can still receive a fair price for the work you have put into it.
Achieving the best price
A business is worth exactly what someone is willing and able to pay for it. There are formulas and calculations that can be used to arrive at the initial proposed valuation – but the only way to assess the true value of your business is to put it on the open market and see what offers come in.
Even though there will be uncertainty as to the true value of the business, there needs to be a starting point. Over the years, accountants and business agents have used different methods to get the initial ballpark figure.
This usually involves looking at the net profits of the business, adjusting them to remove any unusual or one-off items and adding back any costs or expenses that should be included. Once this is done an appropriate multiplier (dependent on the type of business and market conditions) is applied to the adjusted profits.
Many advisers still claim that valuing a business is an art as opposed to a science. Two independent valuers could quite easily arrive at different valuations.
Experience plays a major part in valuation. Professional advisers may be able to draw upon similar situations that they have been involved with. They will use this to ensure that a third party purchaser gets a clear picture of any business that is being sold.
The actual multiplier to apply will depend upon the business itself, the business sector and the economic climate. Again, experienced advisers may be able to draw upon their knowledge to arrive at the correct multiplier. An independent valuation will have more credibility with the potential purchaser.
Have a clear plan
Before you sell, know which aspects of the business you want to sell. Consider what assets the business has and if there is anything that needs to be excluded from the sale. If the company is incorporated then you will need to decide whether to sell the business as a going concern (selling all of the assets but not the company), or sell the shares of the company (selling everything including the company). Careful consideration needs to be given to each option and aspect of the sale.
Get professional help
Selling a business can be complicated and during this time the business still needs to run successfully. With your attention focused mostly on the sale, the business may suffer. So, getting professional help allows you more time to manage the business as normal. A lawyer will be needed to draw up or review documentation to negotiate the best deal for you, and a business broker is a must in finding potential purchasers.
Get the business affairs in order
Make sure that during the sale the business is running as it normally would. Ensure that all records are up to date and try to pre-empt the things that the purchaser may request. These might include ongoing contracts and details for the employees. Make sure these are readily available.
Selling a business can be a long process, but after all the time you have spent growing the business it is worth taking the time to make sure that the sale is right for you. Don’t be afraid to turn down a purchaser if their expectations do not fit in with your own. You need to ensure that when you do sell, it is at the right time and for the right reasons.
Careful preparation and professional help are essential to ensure that your business sells on your terms.