Health check to improve your business sale prospects

Understand what buyers expect from a good business proposition to improve your prospects for business sale.

All sellers want to maximise the value of their business when they sell. Chances are you’ve spent years or even decades building up your business and if you’ve now decided to move on to the next phase in life, you want to make sure that all that hard work is recognised in a decent financial return on your business sale.

What you want from your business and what a buyer is prepared to pay may be two very different things and if you want to reconcile the two to reach your best potential price, which means you’re going to have to do some preparation.

We have acquired a number of accounting practices over recent years and that means we’ve learnt a thing or two about what to look for in a good business. Many of those tips apply across the board, to all businesses.

So, here are our tips to sellers on what buyers expect from a good business proposition:

Buyers of a business are looking for a sustainable on-going enterprise.

Past performance only gets you so far to demonstrating that a business is a good proposition going forward. As the seller, you need to be able to convince the buyer that what you’ve built up is a business that will last, because ultimately the buyer is paying for future turnover, not past turnover. Analyse your client base and when you’re setting your price, take a realistic approach to determining how many of your current customers are likely to stick around once you’ve gone and how many are vulnerable to technological or market changes.

Are you prepared to stay with the business in a consulting role once you’ve sold out, in order to ease the transition?

This can be a tricky one – some buyers like the seller to retain an ongoing “consultancy” involvement, others prefer a clean break. But at least prepare yourself for the question and have clear in your mind whether you are prepared to stick around or prefer to make a clean break. Ideally, the seller will have staff that can be on boarded by the buyer, which have a significant working relationship with the clients.

Are you prepared to accept that many buyers will not want to pay all the consideration upfront but may want to pay a proportion of it in future, linked to ongoing business success? Clearly that approach passes some of the future risk of success onto you as the seller but equally, if the business over-performs, you stand to benefit from that.

Will your key staff stay on or will they all walk out the door the minute you sell?

Buyers are likely to want to know exactly what you are selling, including staffing resources so, recognising that you can’t speak for others, you need to have at least some indication of staff attitudes to a sale and to the particular buyer.

Build yourself (and your business) a resume.

That’s a great starting point to get a snap shot of your business and an instant health check. Based on that resume, answer for yourself the questions:

  • What would I pay for a business like this?
  • What are the selling points of my business?
  • What do I need to do to bring my business up to expectations?

Charles Nakkour, Acquisitions Manager, H&R Block

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