Whether you are seeking an exit from your business in the short, medium or long term, it is always beneficial to bare in mind how any potential acquirers will perceive your business. In order to attain the highest value it is important to get the company in the best possible shape. In doing so, business owners should endeavor to eliminate any potential issues which may arise come the due diligence process.
A decision must be made regarding the most appropriate deal structure for the owners, with both current and future objectives in mind. This consideration should begin with any tax implications.
Tax implications
These can vary depending on a variety of different factors relating to length of ownership, business type and the structure of the deal. Thorough planning with a tax advisor will possibly enable substantially reduced tax costs following completion of sale. Be sure to consider personal and family tax positions along with that of your business.
After this you will need to begin gathering the following documents:
Preparation
When preparing for the sale of your business, one of the most important things to do is place yourself in the position of the acquirer. If you were acquiring the business what information would you want to see in order to make the appropriate decisions?
First of all, gather all of the necessary financial statements. It is hugely important that these statements are as up-to-date and accurate as possible. If you are currently halfway through a financial year be sure to gather last year’s full statements in addition to the business’ year-to-date figures.
When it comes to presenting your business’ finances it will generally pay to employ a professional to ensure they are as attractive as possible. Ensuring your business is well presented on paper is the first step towards attracting the right type of acquirer. Having a budget for the coming year will also aid the acquirer’s decision.
Sales Tips
Some of the most important factors to consider in order to get your business in the best possible position to ensure a successful sale are detailed below:
What do acquirers want to know?
As mentioned previously, it can help to place yourself in the position of the acquirer. If you were serious about acquiring your business what specific information would you want to know to help with your decision making process? Set out below are some questions that you may be faced with when you come face to face with any prospective acquirer:
Cash Flow
It is important to keep in mind that a primary influence in the majority of acquisitions will be cash flow. For this reason, business owners preparing to sell should first sit down with their accountant and get their financial statements in order, with cash flow being of particularly high importance. Cash flow is not the same thing as profit. The majority of acquirers will study profit and loss statements and tax returns in addition to owner compensation. Acquirers will consider excess compensation to shareholders and employees.
Acquirers will also pay due consideration to sizable, one-off expenses such as investments in systems. They will look closely at non-cash items such as amortisation and depreciation in addition to expenses or owner prerequisites.
Order book
Identify and profile your best customers and endeavor to increase the presence of this kind of customer on your order book. Throughout the sale process it may be necessary to re-adjust the business’ sales database with a different profile of custom, particularly if you develop any new products or services.
New Products
When you are preparing for the sale you should consider your entire product line in relation to the marketplace. Acquirers will be more attracted to businesses with a strong product or service offering, correctly positioned within the market. Produce a marketing plan which identifies the demands and tastes of your potential consumer base and make sure your product or service offering is aligned appropriately.
Eliminate Surprises
It is vitally important to review every facet of your business and be proactive in eliminating the possibility of any negative surprises cropping up. Acquirers like businesses which offer high levels of predictability, so ensure you address any potential problems in advance as it may save a potential deal falling at the final hurdle.
Finally
It is important to remember that in order to do justice to the many hours you have put into nurturing and developing your business, it is very much worthwhile devoting a few more to ensure you are in the best position possible to achieve a successful sale.