When selling a business, the big money is in the preparation not the actual transaction, says Craig West, chief executive of Succession Plus and executive chairman of the SME Association of Australia.
He believes owners should start preparing for a sale, and ideally engage a professional, 12 to 18 months ahead of going to market. An adviser can help a seller secure the maximum price by developing and overseeing an exit strategy that involves de-risking the business, protecting value, implementing changes, securing future income and locking in key staff.
Accountant Andrew Kedwell, principal of Andrew Kedwell & Co, who typically acts for buyers, says sale negotiations are fragile and can fall apart over minor issues such as who will draw up contracts.
To appeal to buyers and increase the chances of a smooth and successful sale, business owners need to make the information-gathering and due-diligence process as easy as possible, he says.
Savvy sellers make it easy for potential buyers to gain a solid understanding of a business by providing a buyer’s kit which could include general industry and business information, customer demographics, and a rough contract for sale, he says.
Bringing in an outside party can help with the preparation of this and the entire sale process. (While successful entrepreneurs are extremely knowledgeable and skilled in their respective fields, they typically don’t have the experience and know-how to negotiate and manage a business sale.)
Don’t let emotion get in the way
They’re also “emotionally connected” to the business, which is often a detractor during the sale process, West says.
“Selling a business is emotional because it commonly represents a family’s largest financial asset and a lifetime of hard work. It’s far more emotional than selling a house.
“In my experience, where there’s a lot of emotion involved, people get hung up on price and they don’t pay enough attention to getting the terms right, which can be more important. A seller can achieve a significantly higher price, and better terms, by getting a professional involved.”