Determining the saleability of your business
The sale of a business is a major process for anyone looking to move on. The speed and value of your sale depend on many factors, and while you might not be in control of all of these, there are always some areas you can work on to make the process more weighted in your favour.
- Is the business in an attractive industry?
The industry your business operates in can have a huge impact on the amount of interest you receive. Some businesses – like cafes and hotels – have a strong appeal because of the lifestyle choices people make, while other businesses – such as watch or shoe repair – are dying industries that require specific skills.
- Is the business in a location that is convenient to buyers?
For some businesses, location doesn't matter, as it can easily be changed. However, if you've signed a long lease on the edge of town, when there's a more convenient shopping centre or industrial park nearby, you may find it harder to sell.
- Are your assets in good shape?
For businesses that have large assets, it can be a huge help if these are in good working order and are recent models. If the new owner is going to have to buy or repair what you have, this adds an extra cost to their purchase.
- Do you have quality inventory and good supplier relationships?
If a buyer can see that you've taken care of your stock and your network, this will make their job a lot easier when they step in to run the business. If they need to create these relationships from the ground up, they may consider whether it's easier just to start a new business.
- Do you have a solid customer base?
If you can show that your business has a lot of returning customers, or that you have a business model that brings a lot of people in regularly, this will make a purchase a lot more attractive. Without these, a buyer could again look into starting a new business rather than buying yours.
- Can you transfer your business to another person?
How vital are you to your business? For some service-based businesses, the entirety of the value is in the owner's skillset. You need to make sure there are people who can carry out your tasks and that processes are well documented so your departure won't cause too many problems.
- Do you have a healthy balance sheet?
For a prospective buyer to really have interest, you need to be able to show that your business is profitable. Having at least two years of financials that show you have manageable debt, a regular source of income and that all your assets are documented can give buyers a boost of confidence to make an offer.
Taking advantage of any of these tips is best done in a considered and strategic manner so it’s a good idea to discuss your succession plan or ideals with a good accountant at least 2-3 years before you’re ready to sell. They can help you prioritise actions, prepare budgets and set up structures to maximise the chances of the best outcome. Some of these things however, take time and results could well depend on the actions you take at least 3 years earlier.
If you need help getting your finances in order or to improve the saleability of your business, Active Accounting Group is here to help. Call us on (02) 4044 1245 or email us at admin@activeaccountinggroup.com.au.
