Preparing your business for sale

The more prepared you are for the sale of your business, the better the chances of you maximising your returns.

A key question is who is your target buyer with the most likely candidates falling into one or a combination of the following categories:

  • your existing business partner or partners
  • an existing employee or employees
  • an external third party or parties

Once you have established who the target buyer is, then you can commence developing and/or modifying your exit plan.

While the health of the business is critical, there a many other issues that will impact on the final sales result. The key issues that a buyer will focus attention on are: (i) a strong profit history, (ii) a demonstrable growth path, and (iii) buyer integration benefits (particularly relevant for third partner buyers).

Another important issue relates to the consequences of you leaving the business and whether you are prepared to continue in a transitional capacity. Is your role able to be made redundant or transferred easily to someone else with minimal impact? This will depend on the extent of delegation that you practice, and whether processes and levels of authority are well understood and practised.

A few key questions that you may wish to consider are provided below:

1. Selling to a Business Partner

  • Has your business partner agreed to buy your share of the business?
  • Has the timeframe for the sale been agreed with your business partner?
  • Does your business partner have the funds to buy your share of the business?
  • Do you have an existing exit plan agreed with your business plan and, if so, is it up-to-date and relevant?
  • Is your partner able to readily replace you in the business?
  • Are financial and management reports up-to-date and do they reflect the actual status of the business?
  • If you and your business partner cannot agree on the sales terms, what is your best alternative to a negotiated agreement (BATNA)?

2. Selling to an Employee

  • Are you and your business partner selling the whole business to an existing employee or just your share?
  • Has the timeframe for the sale been agreed with your business partner?
  • Has your business partner agreed to enter into a new partnership with an existing employee?
  • If you cannot find a suitable buyer within your timeframe, what is your best alternative to a negotiated agreement (BATNA)?

3. Selling to a Third Party

  • Are you and your business partner selling the whole business to an external third party or just your share?
  • Has the timeframe for the sale been agreed with your business partner?
  • What can you (and your business partner) do to make the business more attractive to a third party buyer?
  • If you cannot find a suitable buyer within your timeframe, what is your best alternative to a negotiated agreement (BATNA)?

You will need to consult a lawyer to ensure you have a proper and legally binding agreement. Remember that whenever exiting any business, you must also make sure any on-going liabilities are addressed.

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