Key points
- Start planning your business sale well in advance, ideally five years, to maximise value and control your exit strategy.
- Clearly define your goals for the sale, including financial outcomes, legacy, and employee continuity, to guide how and to whom you sell.
- Understand your business’s current and potential value to ensure you’re prepared for buyer expectations and future opportunities.
One of the common mistakes business owners make is not planning ahead for the sale of their business.
Do you want to be proactive instead of reactive about your exit from your business? What if you need to unexpectedly sell the business? Are you prepared for that possibility?
Our advisors often see family business owners, who are ready to retire, expect to be able to sell their business overnight, or in a short time frame. The problem is that they may not realise the maximum value for the business or see it continue as they would like.
The solution is to plan ahead. Advanced preparation for the sale of your business can help put you in control of your exit. Five years ahead is a good benchmark. With the benefit of time and the right advice you can maximise the benefits of the blood sweat and tears you put into the business.
The current environment for selling your business
Pitcher Partners Dealmakers 2023 Report has some valuable insights and good news for Newcastle and Hunter business owners regarding mergers and acquisitions and selling businesses.
The Report shows that, while the recent dealmaking frenzy has been replaced with a more strategic and opportunistic approach, there are plenty of buyers looking to buy mid-market businesses with solid fundamentals and growth prospects. Sectors where dealmaking interest are strong include those operating in Newcastle and the Hunter – such as industrials and chemicals, energy, mining and utilities, real estate and technology.
Five steps to take when selling a business
With that positive news on the selling front, here are five steps to take to get the most from selling your business.
1. Know what you are trying to achieve from selling the business
The first question to ask is what you want to achieve from the sale of your business. The answers to this question may dictate how and to whom who you might sell your business.
An obvious consideration is maximising the sale price and your potential windfall or retirement income. But many businesses that our advisors support have other considerations too.
Family business owners may want to keep the business in the family or with non-related managers and staff. Business owners often consider the future of their employees when looking at how or who to sell to. The legacy of the business is also often important. While it can never be guaranteed, do you want your business to continue operating in a particular market or location?
2. Understand the current and potential value of your business
Knowing the value of your business is essential, particularly if you are relying on sale proceeds to fund other business opportunities or retirement.
As well as a current dollar figure, it is useful to put yourself in the shoes of a potential buyer and consider future or potential value. How attractive is your business to potential buyers? What are the business’ unique products and services and can they be copied by competitors?
How critical are you to the business? If you are the reason for current customers and the business relies on you to bring in new business, then the business can be less attractive to a buyer if you aren’t there. Do others in the business have those skills? Planning ahead gives you time to work on making yourself redundant to the business.
3. Get your systems and processes in order
Regardless of whether you are critical to the business, taking time to implement and document systems, policies, processes and structured risk assessments will give potential buyers more confidence and add to their perceived value of the business.
Make no mistake, potential buyers will ask for this information as part of their due diligence. You don’t want to miss an attractive offer because of the time it takes to do this work.
4. Get your financial house in order
Similarly, you need your financial house in order. That includes systems to measure and record financial performance, budgeting, and forecasting. Potential buyers want to see good monthly financial data and reliable projections. It also extends to management reporting – systems and documents measuring key performance indicators.
Going through the process well before sale can not only improve current business performance and profitability, it gives you time to identify and address gaps to enhance the attractiveness of the business to potential buyers.
5. Use experts to maximise your returns from the sale of your business
Undertaking this pre-sale planning and work is part of working on the business. It can be difficult for business owners who need to or like to spend their time in the business. The good news is that skilled business advisors do this work every day for a range of clients. They know the questions to ask and what buyers are looking for. Even if you have managers doing some of this work, a good business advisor is a valuable and cost-effective extra set of hands. One that also doesn’t have a vested interest in a particular outcome – other than helping you to get what you want from selling your business.
Got a question about selling your business?
We love questions. If you want to know more about Pitcher Partners Newcastle and Hunter’s business advisory services, please contact us.
Shaun Mahony is a Partner at Pitcher Partners Newcastle and Hunter specialising in auditing, business advisory, business development and strategic planning, deal advice, due diligence, and mergers and acquisitions.
