Selling a business is not something you can wake up one day and do instantly. It is a process that can be daunting, especially if it is your first time in such a scenario. There are many reasons why people reach the point of selling a business. It could be time to change and take up something you have always wanted, travel, or even retire. If you have decided that selling is the way to go for whatever reason, you need to start working on a plan to ensure you get the highest profits possible from the sale.
The Australian business climate is good, and most businesses thrive, including small ones. Finding a buyer for yours should therefore be doable as long as you have packaged it in a way that attracts the best buyers, bound to fetch you good profits. So, what can you do to ensure you sell your business profitably?
Value the business
There is no way you can sell a business profitably if you have no idea how much it is worth. Therefore, the first step to making those profits is to understand how much the business is worth through valuing. The most commonly used valuation methods include:
- Analyzing the market.
- Calculating the business’s net worth.
- Using the return on investment.
When analyzing the market, you should compare the business with a similar one in the market or similar businesses that have been sold recently. Whereas this may not give you a formal value, it offers some guidance on the market price possibilities.
Valuing the business by calculating its net worth is comparing the difference between the assets and liabilities in the business. Tangible assets like buildings, land, and machinery should be included when calculating, and so should intangible ones like brand name, recognition, goodwill, and intellectual property. As for ROI, the net profit is used to get the value of the business. If the process appears a little tedious, or you have no idea how to go about it, you can get a professional to help you value the business; that way, you can be sure nothing will be forgotten or left out when the valuation is done.
Clean up your finances
Buyers will be skeptical if they suspect that the reason behind your selling is financial. They will end up questioning if the business is worth investing in. Therefore, you want to ensure your financial records are clean and impressive. The more organized and profitable the business, the higher the buyers’ interests will be.
You can streamline your financial records by paying debts and clearing as many creditors as possible. No buyer is interested in coming and starting running after the money owed to the business. Transfer the business to a clean slate as much as possible, making it easier for them to take over and continue flawlessly.
Taxes should also be in order. If you are in good books with ATO, the buyers will be confident in knowing no tax burdens are being passed down to them. Do your returns and ensure everything is well-documented.
In case your finances are in turmoil, it could be necessary to get a business advisor to help improve the current situation before the sale. Buyers can take advantage of the financial problems you are facing and end up buying the business at a throwaway price because they know you are desperate to sell. Confidence in the finances will instill the same kind of confidence in the potential buyers.
Decide what is for sale
Selling a business usually means selling the operations and management. But you can increase sell at even higher profits when you include other things that are business related like assets, registered business name, intellectual property, and property owned by the business, including land. The more you throw into the sale, the higher your profits. Be clear about what is for sale and outline why it benefits the buyer; it will make the deal irresistible.
Add a margin for negotiation
It is highly unlikely that a buyer will take you on your offer without trying to negotiate the price. Usually, after giving your price for the business, the buyer will counter the offer, and then together, you can negotiate to reach a price you agree on. Because you already know what the business is worth, you must also know how low you can’t go. To stay safe within what you consider reasonable, add a margin on the price, so there is room to negotiate; that way, if you need to go lower, then it will be up to that point you know you can’t go under.
Sticking with your asking price can make you appear too rigid, so flow with the buyer and connect till the deal is sealed. However, when adding that margin, ensure you do not overdo it because you can turn away good buyers. Be reasonable with how you handle potential buyers, and at the same time, increase your chances of getting the best in profits.
Advertise the sale
When selling a business, you need to know the target people. Do you want to sell to locals, or would you rather get offers from across the board? The wider the reach, the higher your chances of getting good offers and finding the right buyer for the business. Let the type of business, industry, and contacts guide you in your advertising method. You can decide to use the following:
- Business brokers
- Real estate agents
- Traditional and digital media
- Word of mouth
- Existing networks like employees, friends, and family
- Current or former business customers
Conclusion
When looking to sell a business at the highest possible profits, you cannot commit to huge investments to improve the profits. The best you can do is to improve on what you already have so the business entices buyers. But even when marketing the business for its value, let the buyer know of any challenges you face in the industry or problems you might have with the business. Being completely honest lets the buyer know where to tackle the business and eliminate the existing issues.