How To Get The Best Price For Your Business

Selling your business at the tight time, and for the right price, can be a very difficult thing to get right.

Too many small business owners make the mistake of going on for too long, only to find their business loses value because they no longer have the energy to drive it forward.

Others are forced into selling suddenly because of personal reasons and are, therefore, not in a position to secure the best price.

For most, it is the single most important business decision they must get right. Many firms just eke out a living for their owners – and only when they sell do they make the sort of ‘real’ money that makes the whole process worthwhile.

The first two to four years are usually all about set-up and start-up costs, the next four to seven making a little money and paying back those costs. It is only in the last period that any real money is made, when the business is sold.

Most business experts agree that preparation is the key to achieving a successful sale and this can begin a year or more before you intend to sell. It might be that you have fantastic revenues from clients but have no contracts with them. You may have staff but they are all somehow self-employed. You need to make everything legal and above board because otherwise it won’t stand up to the test of due diligence. You should also look at cutting your unnecessary costs to make the figures look good.

Many small business owners worry that the process of putting up a business for sale could undermine confidence among customers, suppliers and employees. They are also worried about competitors, who are notorious for posing as buyers to find out commercial information.

Sometimes, one of the best ways of selling your business is to make direct approaches to people who you think might have an interest.

Another option is to hire a business sales agent, of which there are many, some specialising in particular sectors. These use advertising and approaches to contacts in order to achieve a sale.

However, some try to persuade you to hire them by talking up the sale price they might achieve.

Where the anticipated sale price is £2 million or more, it may be worthwhile to approach a corporate finance specialist firm. These will tend to produce a sales document and identify potential buyers for you, making approaches on your behalf. Interested parties will usually need to sign confidentiality agreements.

Yet many sellers are so delighted to have potential buyers they become nervous about asking them searching questions. You really need to do your homework on them. A simple thing to do would be to credit reference them. It may only cost you £50 and it would be money well spent. Find our just how they intend to pay for your businesses.

If it is by a bank loan, get them to show you the offer letter from the bank. Serious buyers will not be put off by these questions.

Selling does not always have to be a one-off event: it can be done over a period of time. You could sell some of the equity and work with the new shareholders over a period of time so there is a minimum of disruption.

Whatever route you choose, however, try to make sure the sales process does not cause any interruption to the business, because this may undermine its value.