News Articles

Update: The Australian and New Zealand operations of Bibby Financial Services were acquired by Scottish Pacific Business Finance in late 2015 to create Australia’s largest non-bank invoice finance specialist. Welcome to our website.

scottish pacific valuationWhen you sell, sell well.

It is a given that if you want to sell a home and maximize the price, preparation is all-important.
The same mentality is required for the sale of a business – in fact, preparation in this case is arguably even more important because the planning is something that should happen well in advance before you hand over control of your business to a new owner.
So how can you maximize the value of your business and get it ready for sale?

1. Draw up a detailed plan
This is probably the most important element of all. This planning should happen at least 18 months before you cash out, and possibly two years or even longer.

By developing a strategy well in advance of a sale, you stand a much better chance of getting the price you want, at the time you want it. So set your goals around timing and pricing, learn how the selling process works (including taxes that will have to be paid) and consider any and all other actions you will need to take to get the business sales-worthy.

2. Get your finances and cash flow in order
With any sale, it very often pays to seek independent financial advice to guide you through the maze. But paying attention to money matters is a basic starting point.

If selling up is your exit strategy, there are many things you should do to make sure your business is performing at its peak. A critical aspect of performance is cash flow. A good ‘clean up’ of a business’ cash flow position should include many aspects such as collecting any overdue debts and paying creditors; reviewing your collections and accounts receivables processes; re-establishing and enforcing terms of trade; identifying problem debtors; considering trade credit insurance to cover against bad debts; pruning non-profitable customers; diversifying your customer base; modernizing your accounting systems; upgrading other machines and equipment and documenting key financial processes, including gathering audited financial statements for recent years.

You should also take a look at the stock and equipment you hold, assess how much you need on hand and manage inventory to this level, then sell what you don’t need. In essence, you should be trying to ensure that life will be as simple as possible for the new owner – because that’s valuable to potential buyers. Putting in place financing arrangement also provides the buyer some certainty.

3. Review and renew contracts
Prospective purchasers want to see a business that has ongoing, repeat income. So make sure you have clients on extended contracts and obtain written agreements from your suppliers so any arrangements continue through and beyond the sale of your business.

This certainty of business continuity should also extend to your suppliers, for example the lease of your premises, so the new owner is walking into a site that is covered by a lease (and one that can be transferred to them). Having contracts in place with plenty of time before they are due to be renegotiated helps the buyer focus on the important issues associated with the transition period.

4. Staff and customer care
Engaged and motivated staff and satisfied clients are critical to everyday business performance but when a business is being prepared for sale these aspects take on even more importance. Ensure you remain close to your staff; update any HR records; consider a talent mapping exercise of your staff; run a staff engagement survey or consider a staff engagement programme in the preparation period.

Consider running a customer satisfaction survey and set up feedback processes after each sale, as the information will not only help identify any issues for resolution but also provide ‘proof points’ for the claims you make around business performance. Identify your best and more profitable customers and double down on efforts to retain their business and strengthen your relationships.

5. Consider debtor finance and use it as a selling point
Naturally, there are numerous financing tools available to Debtor finance, an excellent tool for helping prepare your business for sale. This line of credit, linked to your outstanding accounts receivable, provides you with cash so you can use it to quickly benefit your business and keep cash flowing.

Firstly, strong cash flows is appealing to the buyer as it is a good indication the business is well run. Secondly, having a finance facility in place which is not linked to the seller’s real estate is also advantageous, as the process of changing securities can be complex and time consuming, and in the scheme of things it is one less thing to be concerned about.

Thirdly, this type of facility provides rapid finds which may mean you can leverage buying opportunities (such as favourable or discounted prices) to maximise sales and profit in the pre-sale period which is good news for margins in the early stages of trading after the sale.

Finally, debtor finance can be something of an insurance policy following the sale, when there is often some uncertainty and trading ‘hiccups’ can occur. Having access to funding to boost cash flow quickly helps ensure cash flows are strong and the business can withstand any such shocks, allowing the incoming owner to focus on a smooth transition.

< Back to News articles

×

ENJOYING OUR CONTENT?

Subscribe to receive relevant articles and news to help you manage and grow your business.

Your Name(*)
Please let us know your name.

Email Address(*)
Please let us know your email address.

Invalid Input