Before starting the process of selling your company it is only natural for you to want to as much as possible. If you are able to successfully take the necessary steps in doing so you will likely be selling your business for a premium. However, as with everything in business, make the wrong move and you could end damaging the value and get less money. To avoid such situations there are a number of measures that can be taken to ensure that your business is in the best position possible to sell, some of which have been detailed here.
Understanding and being aware of all of the contracts your business has is extremely important when looking to sell. One of the most important to look at is your premises lease. If you lease a space for your business you may be required to inform your landlord, before you sell, that a deal is near. Much depends upon what is written within the contract. You may need their permission and what are the potential dilapidations? You certainly don’t want a situation where you have a potential buyer that is interested based on the property and location, but will not be allowed to renew the lease.
Regardless of what industry you are in, having accountant prepared financial statements (produced in a timely manner!) is a must when looking to sell. Consider management accounts. Having these prepared for a potential buyer will not only show a certain level of professionalism on your part, but it is also a clear indication of being an organised business whose numbers can be trusted.
Most business owners more often than not will use their company to pay for ‘perks’ as a business expense. This may consist of lunches, travel expenses and even trips, but this will be looked at when you are seeking to sell. Unless properly accounted for, especially tax wise, it not only looks unprofessional, but it will decrease the value of the company in the eyes of the buyer.
One of the biggest mistakes that companies can make when preparing to sell is to chase after low margin business in an attempt to increase growth. Whilst this may seem like a good idea, it ultimately damages your gross margin, can harm cash flow and to the buyer will look as if your business is going backwards as you need to buy in business.
Having contracts or subscriptions with customers is a great way to show sustainable revenue however within these contracts it is important that you have what is called a ‘survivor clause’. This effectively states that just because there is a change in ownership of the company their contract cannot be cancelled. Buyers want a smooth transition and not having to tell customers about the sale removes a major risk and this improves the value of your business.