Selling Your Business
Many small and medium sized businesses experience regular cashflow problems. It is more common than you know and businesses are often engaged in juggling debt. As an insolvency consultant, I see firsthand what can go wrong. I also often get to learn what would have made a difference, but by then it is too late. This is frustrating, knowing so much financial pain could been lessened or avoided altogether.
If you are experiencing a financial crisis in your business then you need someone that offers professional guidance based on both insight and experience. Oftentimes the ‘usual suspects’ simply do not have the business experience that comes from working in the insolvency sector. Financial crises come in all shapes and colours, we deal with them every day and we learn something each time.
Often the real reasons a business is performing poorly are not obvious until it undergoes a due diligence process. Don’t have your first due diligence as part of the sale of your business. This is likely to turn into the purchaser being able to walk away from the deal. Run your own check, or get help. Address the issues and establish which ones you can fix and which ones you cannot. How would this situation look under a new ownership? Can you turn weakness into strength? Is it your personal debt that is dragging down the business? There are solutions and under some circumstances you may be able to go bankrupt and still operate your business, freeing up cashflow.
After losing my small chain of 5 retail stores, I ended up in Commercial Real Estate selling businesses. I was very surprised when researching business listings to find that many with substantial asking prices had no more than junk value.
The prices reflect the owners financial needs to get out, not the value of the business. Don’t let your business become such a listing. I started to help struggling business owners, who had little to sell, to turn things around and stay in business. In this way they would eventually have a business to sell.
It is utterly pointless to misrepresent a business and hope for a sale price based on a basket-case valuation. The figures must stack up so the buyer can borrow against the business. Keep in mind that cash buyers are rare. Should you find a ready and willing buyer, the accountant or the bank manager will pull the plug on sighting the due diligence report. Due diligence is there for a reason and I have never understood why agents would even run misleading, if not shonky, listings. Make the sale of your business possible by representing it accurately.
At A1 Debt Assistance we receive calls from business owners ready to enter into some form of bankruptcy. Often, we help them avoid this. We accomplish this by analysing their situation thoroughly. It is very similar to a due diligence process. Our objective is to detect the main cause of your business problems and develop remedies.
A purchaser does not have the same overheads as the current seller. This relates to existing car loans, business loans, over drafts etc – all such figures are called add backs. Running through this process will tell you if you have a business that could be viable to a particular purchaser. It will also determine your asking price. For tax reasons we are encouraged to make business purchases on finance and use the finance costs as write downs. Unfortunately, when the turnover drops, your repayments remain. The tax saving is now killing your business. There are insolvency options that may actually help you, whilst still being able to keep your business. How does this help you to sell your business?
People generalise things and overlook the detail. To establish your best sales options for a difficult business, get someone that has the skill to look at the detail. Numbers tell a story, they don’t just add up. Get professional help to decipher the story for your business.
Different buyers have different reasons to purchase a business. A buyer may not be concerned that your business may have major flaws. Rather they see value in certain parts of the business. This could be your client roll or a contract that is not viable for you but would be ideal for the buyer’s business. Perhaps your business location is what a buyer seeks. In this case you could sell the lease.
Once you understand all the potential values of your business, you will be able to create a list of targeted buyers. If you approach a competitor their approach will likely be waiting for you to close the doors to allow them a no-cost takeover by going to the landlord direct.
Why Advertising Is Important
To avoid the above scenario your buyer should fear they could miss out. It is essential to try and have more than one buyer, since this will give you a much greater chance to sell your business for the best possible price. Advertising is the best way to achieve this. Let as many prospective buyers know about your opportunity.
To advertise your business for sale, you should check out Australian Business For Sale. This is one of Australia’s leading and longest established Business and Franchise opportunities publication and website.