Thinking of selling your business? Here are 4 things you should consider before selling your business.
Selling your business should be a well thought-out process and the decision should be made without any doubts. Ideally, you should make your decision three years prior, but this is not always possible. You will need to plan ahead and start gathering information from brokers that will attract prospective buyers. You can also do an independent business valuation. This early planning phase is viewed by some as an exit strategy. The duration it takes depends on a number of factors:
- How quickly you want to sell your business. In the event you need to sell your business suddenly, it is important you have a licensed broker to assist you in finding business valuers.
- The state of the market of your business. Most businesses have cycles and yours is no exception. An experienced broker will advise you on the best possible time to put your business on the market.
- The state of your record keeping, particularly your accounts. You are more likely to find a prospective buyer if your books are in order.
- How close it is to the end of the financial year. Business trends especially steadily progressive trends over the financial year will do more good than harm when you are putting up your business for sale.
- The readiness of your business for a takeover. The more ready your business is for a takeover, the faster it will be to sell it.
Before putting up your business for sale, there are some things that you should consider in addition to having an independent business valuation. This will allow you to make a sound decision. They include:
- Prospective buyers. It is crucial that you identify likely buyers of your business. This will help you carve out your sales strategy and whether you should sell your business on the open market or through a succession strategy. Family succession strategies should be in place if your business has been run by the family for a number of years.
- What are you selling? You should have an idea of what you want to sell. Is it the business or the underlying structure that owns the business? Careful planning in the lead up to the sale of your business could lead to significant tax benefits. If you have a small business, you should consider applying for the small business concessions from a capital gains tax perspective.
- Unwanted assets. Unwanted assets will have to be cleared since they will influence the ultimate price of your business. It is better if you separate non-core assets such as land that the business sits on from those that are crucial for the normal running of the business. This will make your business more affordable and attractive to a potential buyer. You will have to clear retained earnings in order to trim down the value of your business’ balance sheet.
- Due diligence. You will have to conduct due diligence around items such as intellectual property and personal use assets on the balance sheets. This will ensure that your trade debtors and creditors are up-to-date. It will also determine the terms of your business’ sale.
You should not sell your business without a valuation, the disadvantages to you are far too great. You can also do an independent business valuation and save on costs.
Director – Business Improvement
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The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
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