Business > ADVICE FOR SELLERS
While owning a profitable, cash flow positive business might make you feel wealthy, your business hasn't realised its true value until it is sold. Selling a business is one of the most common ways for business owners to generate significant personal wealth.
Business advisors and successful entrepreneurs recommend you never enter a business without first defining your exit strategy. However, often we work with business owners who have a need to sell their business before they are ready to and before they have had time to plan for it properly.
The Eagle1 team have been facilitating the sale of businesses and have plenty of tips and advice to share about improving the value of your business and increasing the wealth you can generate from its sale. Here are some of them:
1. "Profit is food but cash is air" - Kerry Packer
Improve your capital requirements and ensure that your assets are sound
prior to listing your business for sale. The sale price of a business is
often calculated based on a multiple its earnings. However, a sophisticated
buyer will go further than glancing at your Profit & Loss when considering
purchasing your business. They will also consider how much cash the business
needs to run and whether they are capable of raising that required cash.
Risks that a potential buyer will consider include potential changes in
working capital, any assets that might require replacing as well as the cost
of initial improvements that need to be made. If a potential buyer perceives
a future drain on cash flow they might seek to reduce the price, and your
profit from the sale.
2. Quality (not quantity of) systems and procedures
Make sure your internal systems and procedures are up to date and accurate
before listing your business for sale. Errors or inconsistencies in internal
reports picked up when a buyer is having due diligence conducted can lead to
lost buyer confidence late in the sales process, costing you money.
While internal business systems and documented procedures do present reduced
risk to potential buyers (and therefore increase the value of your business)
it is important to make sure these systems and procedures are achieving
their purpose.
3. Deal breakers and deal makers
Your business might show weaknesses in almost every area but still sell for
a high price. This happens when a buyer can focus on an aspect of your
business that they are able to exploit and is comfortable disregarding its
other strengths and weaknesses.
For example, a business with a great product may pay well for a business
with access to a large customer base, even if the business for sale is not
profitable or sustainable. The same can happen in reverse though. For
example a strong, profitable and well priced cafe is unlikely to sell if its
lease contains a demolition clause.
4. Room for improvement
Having a business perfect in every way is not always the best option for
maximising your sale price. In order to achieve a premium price a buyer must
develop an emotional attachment to your business. Leaving your business with
some cash creation potential for the next owner demonstrates an opportunity
for the potential buyer to make their mark.
If a buyer can see that the business is profitable, secure and manageable
and they can identify opportunities to add value to the business they will
become as passionate about the business as you are.
Business Sale and Valuation Services
Rather than just selling your business the team at Eagle1 work to guide you through the entire sales process, including maximising the price that you achieve. Our Business Brokerage Service is designed to achieve the maximum price for a business in the shortest possible time. Our Formal Valuation Service provides an independent and comprehensive valuation for situations such as partnership and management buyouts, finance applications, family and legal disputes. Our Written Appraisal Service will provide you with confidence in your anticipated selling price. We profile the strengths and opportunities of your business alongside details of recent similar sales and provide a full financial performance analysis in a comprehensive report.
Please contact us for more information regarding our business sale and valuation services.
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