Selling a business

While owning a profitable, cash flow positive business might make you feel wealthy, your business hasn’t realised its true value until it is sold. Selling a business is one of the most common ways for business owners to generate significant personal wealth.
 

Business advisors and successful entrepreneurs recommend you never enter a business without first defining your exit strategy. However, often we work with business owners who have a need to sell their business before they are ready to and before they have had time to plan for it properly.
 

The Gaetjens Business Sales team is experienced in the sale of businesses and we have plenty of tips and advice to share about improving the value of your business and increasing the wealth you can generate from its sale. Here are some of them:

 

1.  “Profit is food but cash is air” Kerry Packer

 

Improve your capital requirements and ensure that your assets are sound prior to listing your business for sale.

The sale price of a business is often calculated based on a multiple its earnings. However, a sophisticated buyer will go further than glancing at your P&L when considering purchasing your business. They will also consider how much cash the business needs to run and whether they are capable of raising that required cash.

Risks that a potential buyer will consider include potential changes in working capital, any assets that might require replacing as well as the cost of initial improvements that need to be made.  If a potential buyer perceives a future drain on cash flow they might seek to reduce the price, and your profit from the sale.

 

2. Quality (not quantity of) systems and procedures

 

Make sure your internal systems and procedures are up to date and accurate before listing your business for sale.

Errors or inconsistencies in internal reports picked up when a buyer is having due diligence conducted can lead to lost buyer confidence late in the sales process, costing you money.

While internal business systems and documented procedures do present reduced risk to potential buyers (and therefore increase the value of your business) it is important to make sure these systems and procedures are achieving their purpose.   

 

3. Deal breakers and deal makers

 

Your business might show weaknesses in almost every area but still sell for a high price.

This happens when a buyer can focus on an aspect of your business that they are able to exploit and is comfortable disregarding its other strengths and weaknesses.

For example, a business with a great product may pay well for a business with access to a large customer base, even if the business for sale is not profitable or sustainable.  The same can happen in reverse though. For example a strong, profitable and well priced cafe is unlikely to sell if its lease contains a demolition clause. 

 

4. Room for improvement

 

Having a business perfect in every way is not always the best option for maximising your sale price. In order to achieve a premium price a buyer must develop an emotional attachment to your business. Leaving your business with some cash creation potential for the next owner demonstrates an opportunity for the potential buyer to make their mark.

If a buyer can see that the business is profitable, secure and manageable and they can identify opportunities to add value to the business they will become as passionate about the business as you are. 
 

Business Sale and Valuation Services

Rather than just selling your business, Gaetjens Real Estate: Business Sales works to guide you through the entire sales process, including maximising the price that you achieve.
 

Our Business Brokerage Service is designed to achieve the maximum price for a business in the shortest possible time. Our fully structured and supported sales process is supported by a professional project management team who apply discipline and avoid short cuts, delivering the best outcome for you and your business. 
 

Our Formal Valuation Service provides an independent and comprehensive valuation for situations such as partnership and management buyouts, finance applications, family and legal disputes.
 

Our Written Appraisal Service will provide you with confidence in your anticipated selling price. We profile the strengths and opportunities of your business alongside details of recent similar sales and provide a full financial performance analysis in a comprehensive 7 page report.
 

Please contact us for more information regarding our business sale and valuation services.

Gaetjens Real Estate established in 1866

 


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