Three considerations when preparing to sell a business

Selling a business can present a slightly daunting process. Naturally, sellers desire maximum return for their endeavour, but it’s essential that high diligence levels are maintained throughout the sale.

While numerous aspects could be discussed relating to this topic, there are three vital points worth knowing. Exploring the significance of valuation, document preparation, and business optimisation for maximum value provides essential insight when preparing for a sale.

Understanding valuation

A critical initial step when selling a business is to carry out a thorough valuation. Although sellers may already have a price in mind, it’s crucial to strive for an objective assessment of the business’s worth; the predetermined price could be biased due to personal investment in the venture, skewing it too high or low.

Excessive pricing may deter potential buyers, complicating the sale unnecessarily. Conversely, a low price risks undervaluing the hard work invested in building the business. Each valuation should consider a variety of subjective factors, including the business’s physical and intellectual assets, the client base, and projected short and long-term growth.

Preparing documentation

Selling a business involves more than merely handing over everything in a disorganised manner and expecting the buyer to accept it. Such a move is not only unprofessional, but it could also render due diligence so challenging for the buyer that they retreat during the sale’s early stages.

Sellers need to meticulously organise all financial records and legal documentation in advance, ensuring everything is in order. Concealing any business negatives is inadvisable – if the buyer later discovers any concealed information and can prove deceit, severe legal consequences could ensue.

The buyer’s legal team will request a broad spectrum of information, and having it readily available will help build a trust relationship, besides accelerating the overall process.

Presale business optimisation

Just as a car is cleaned and serviced to appeal to buyers when sold, the same principle applies to businesses. Sellers should investigate future potential growth areas and encapsulate these in a strategic business plan.

An assessment of the business’s strengths and weaknesses, along with highlighting any promising opportunities that could stimulate future growth, is advisable. A projection forecasting the upcoming years should also be provided to show potential buyers what they might expect.

Given every business’s uniqueness, it’s challenging to make broad claims about the ideal sales strategy. For more tailored advice, it’s advisable to consult a business sales broker like Dexterity Partners, to ensure the sales strategy is optimised for a specific market position.

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