Author: Joanna Miller

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Why signed client contracts are gold dust especially during a business sale

client contract

When you win a new piece of business, having clients sign a contract with your business should be part of your everyday operational procedures. After all, you and your team have done the hard work, which is winning the business in the first place.  What’s some paperwork compared to that?!

Speaking from personal experience, you will generally find that the paperwork trail is left to the last minute and can be easily forgotten about as now the business is busy making sure that its going to deliver it. Sometimes the paperwork gets lost or the contract is drawn up and then gets lost in legalese for months on end.

Whatever the reasons, make the time and ensure that you have signed client contracts. It will be worth it as it helps keep your business valuation up. Buyers love to see signed client contracts, it’s practically an annuity stream. You should love them too!  They simply are gold dust as they help with forecasting revenue and unless something goes horribly wrong – guaranteed income.

Encourage contracts to be drawn up and signed

Make contract signing part of new business process and take a proactive approach. You could offer the sales person an incentive / additional commission / bonus for getting the contract signed within a certain period. If that’s not quite right for your business as contracts are handled by your financial controller or a contracts manager then make it clear what timeframe contracts need to be signed in and manage it. Hold a monthly review where you check on the progress made. The longer you leave an unsigned contract, the harder it will be to get it signed because of i) amount of time lapsed  ii) change in personal – oh, Fred no longer works with us and I’m not sure what you agreed with him…

You may want to record the different ‘stages’ of contract signing so its easier to mark progress made. Here are some example categories where the total count for each would be presented. The information can be further drilldown on as needed:

  • Unsigned (no info)
  • Unsigned (awaiting internal review)
  • Unsigned (on hold)
  • Unsigned (reviewed, awaiting internal signature before posting)
  • Unsigned (posted, awaiting client signature)
  • Signed (by client and scanned to filesystem)

Of course, there may be the rare occasion where an unsigned contract works in your favour. For example, there could be a price reduction based on increased volumes – which only comes into effect with a signed contract. But you should have worked that into your financial model at the outset and be able to bear the reduction in your profit margin. (In other words, that’s a poor excuse for not having the contract signed!!)

All my client contracts are signed – anything else?

If you’re reading this thinking ‘all my client contracts are signed’ give yourself a huge pat on the back. But that’s only one part done before you start celebrating, are all your supplier contracts signed too? And have all your signed contracts, suppliers and clients, been scanned and available electronically for the data room?

And that’s not all….

As well as having your signed contracts signed, do you have all your client contract key details in a single place for a quick and easy reference? Key contract details include:

  • The client’s name (!)
  • Is the contract signed or not?
  • How long is the contract for?  1 year, 3 years
  • How and when does it expiry?
  • Extension terms
  • Pricing
  • Tier

Our Contracts Summary Template has all this key information in a spreadsheet and as such as will help you manage your client contracts better and you will be in a position to answer these questions as well as being proactive in retaining the business when it comes up for renewal or extension (on the basis that you still want their business).

  • What revenue does the contract bring to the business?
  • Is the client one of your top 3? Top 5?
  • Are there any price changes during the contract lifetime and are the finance team aware of it?
  • Do you know when your next 3 client contracts are due to expire?
  • Does the contract need something in writing by a certain date in order to extend it for another term?
  • Which contracts aren’t signed yet and why not?

During a business sale, you want to make sure that none of those signed contracts ends. So, do a deal to secure its extension, remember it’s going to impact your business sale price.

If a contract does ends, don’t lose any of the original details and keep a record of that too along with why it couldn’t be extended or renewed.

It’s worth spending time on contract gold dust especially when it has a direct impact on how much your business is worth to a potential buyer so start reviewing the state of your client contracts today!

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”

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Getting to grips with the data room 101

Data Room 101

Data room 101

As part of every business sale process there will be a period of due diligence. During this period, potential buyers will want to make sure that they are really actually buying the business that they think they are! Part of this will mean that all your company documentation and processes will be looked over. All of this information goes into a data room. Before the days of software used to be a physical room with restricted access. Nowadays the same process is replicated, however, software has replaced the physical room. If your business is less than £1million, it’s likely to be done without any special data room software. However for companies which are larger, expect to use data room software.

Time to get cracking!

Instead of waiting to compile the contents of your data room when the buyer starts asking for information. I strongly recommend that you start as soon as possible. This will help make it less stressful as dealing with demanding questions could take its toll, especially if 10 questions are coming at you from 3 different buyers. You don’t need to spend vast amounts of money on the software, just use Dropbox or box.net to get going. Make sure its got a strong password and if storing the information on your laptop make sure that’s secure too.

Data room software explained

There are a number of companies that offer data room software solutions that include helping you set up your data room (for a fee) and helping you keep it up-to-date. Focusing on the software side of things, good data room software features must include:

  • user login and access management – restrict who has access to what and for how long
  • version control – so changes to documents can be tracked
  • document restrictions – such as the ability to limit the document to be viewed online only and disable print options
  • reporting – information and statistics on the documents as well as who’s accessed those documents

It can get quite expensive and I mean into the hundreds if not thousands of pounds as these data room companies use pricing models that can be per page upload and per page stored in the data room. We go into this in much more depth in our ‘Creating the Data Room Pack‘. That’s why its good to have a ‘test’ data room so you can see how many documents you are storing and can estimate the cost of having the data room for the duration of your business sale.

Understanding the data room structure

Having the right data room structure will help find supporting documentation quickly and keep you organised. Every component in the data room will have a numbering scheme – this applies to both folders and files so check out our top-level data room structure sample in our free document samples section.   Filename conventions are also important especially if they are date related.

That was easy, what’s next?

Now that you’re all up to speed with the data room, its software, and have set up your data room structure. It’s time to collate all the information that goes into it. That’s where our Preparing for Due Diligence Checklist Pack  comes in. The checklist makes sure that you store all your business’ documentation, in the right structure ready for those potential buyers. It’s tough work, but going through this process will help streamline your business as you’ll find quicker and better ways in extracting the information from the business for the data room.

It’s never too early to start – so time to get started!

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”

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My business due diligence experience

due diligence calmness

Due Diligence Naivety

When I first heard the words ‘due diligence’ I wondered what that was all about and was told ‘oh, its when the potential buyers look at your books’.

I took that to meant the business‘ finances; so things like the profit and loss account, balance sheet, bank account statements and the management information reports that we had.

That’s probably true if your business is turning over less than a million. But as my business didn’t fall into that category our solicitor passed over a due diligence questionnaire (DDQ) which ran to 12 pages! It was then when I had an ‘OMG’ moment as I looked through and saw that it covered all the different functional areas of the business.

We started collating the document list ASAP! And to help you know what you’re getting yourself in for we’ve reproduced the list in our ‘Preparing for Due Diligence Checklist Pack’ along with my recommendation for your data room folder structure.

On top of this during the business sale process in order to field and answer all the demanding questions from the buyers, the documents started to pile up.

By the end of the process, for my business, it turned out we had prepared approximately 800 documents! We had to provide examples of everything. Detailed sales forecasts for the next 3 years, samples of our software code (for IPR), a record of the last 2 years salary increases, a list of leavers and reasons why they left the company.

Some of the information was provided by the solicitors, like property searches and they helped with scanning paper contracts as we didn’t have the right tool nor resources to spend on this.

But the vast majority of the documents, 95%, has to come from the business and your business broker isn’t really going to be able to help besides pointing out what documents are essential and missing.

Delegate, delegate, delegate

Preparing 800 documents for due diligence did take a toll on me. Luckily only a core 30 documents changed over time that needed to be updated during the business sale. However, in order to get all the documents ready in the first place, I changed the business operating processes to be more efficient so I could just use the documents as they stood or with minor ‘tweaks’ and at the very least have the right company folder structure where I could locate the information very quickly. I also made sure that processes such as sales, finance, account management were documented which is simply good practice to do.

How you know you’re fully prepared

Having this all in place allowed me to field the questions from potential buyers quite easily and provide the answers within a very short time period, mainly within a 24 hour turnaround time.  Being prepared allowed me to refer them to the right document in the data room to go look at instead of unique answers to each question. And if the answer wasn’t readily available, that’s when it got created and added to the data room.

Of course going around the sales process over five times does make you a pro and you quickly find ways to make it all the more efficient. That’s why I created the  ‘Preparing for Due Diligence Checklist Pack’. It gives you a head start as it includes all the common documentation in a checklist that a business going through due diligence needs.

As long as you have one person that is responsible for managing the data room and can source the documentation from the business whenever needed (this includes 11pm at night), you will find the whole due diligence stage easier and best of all it doesn’t have to all be done by you – allowing you to focus on the business and not in it!

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”

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How to select a business broker

Select a Business Broker – What to look for

Selecting a business broker is easy, selecting the right one should be another key element in your business sale strategy. Business brokers are usually highly experienced executives who have made a career out of selling other people’s businesses. When you have made up your mind to sell your business, your broker will help you go through every stage of the sale process by advising you and preparing the sale documents.

There can be many ways to find good business brokers. The Internet is the most obvious resource, using which you can look for business brokers in your area. Referrals from friends, partners and family members who have had an experience of selling their business are another important resource for finding a good business broker. You can also advertise your requirements for a broker online or through newspapers.

Remember, that it will be you who would be paying the brokerage fees, and your buyer will not share that burden with you. Apart from looking at the qualifications, certifications, experience, and client feedback of your potential broker, you should also pay close attention to the fee schedule and the terms and conditions of your contract agreement that you will be signing with your advisor. Get our The Seller’s Professional Advisors Beauty Parade Pack for more details.

Look at Broker Qualifications

Poor economic conditions have given rise to scams and misrepresentation. You should be doubly sure that the broker you are hiring has the right qualifications and has the legal permissions to represent you for business sale. You should ask any prospect brokers whether they are certified business intermediaries and hold the documents to that effect. A good broker would probably also be a member of International Business Brokers Association and/or other broker associations in different countries and industries.

Look at Broker Experience

Don’t hesitate to ask the business broker in detail about their previous experience and similar cases that they have handles in the past. Ask for references and verify the broker credentials with previous customers before you sign the contract.

Look at Broker Commitment

Even an outstanding business broker is worth nothing for you if that broker does not keep your sale at the top priority. The commitment can be determined by the amount of time a broker devotes to your case, and the amount of workload that a broker has. If a broker is already engaged in bigger deals, the chances are that you will be treated as a second-rate customer. On the other hand, a broker who is without a job might not be a great broker to hire. However, you should not accept anything less than 100 per cent when it comes to attention and commitment from the broker. Make your demand known to your prospect broker, so that your job is taken more seriously.

Look at Broker Fees

The broker fee is usually in the form of a percentage of the sale figure. However, brokers would almost always demand some expenses to be paid up front. While the standard commission is around 10 per cent, many brokers build a lot of hidden charges in their fee schedules, like document preparation fees, consultancy charges and the like. When your potential broker presents you the fee schedule, make sure you thrash every detail and leave nothing hidden in the small print.

Look at Broker Pricing Methods

A professional business broker will determine the price of your business and will guide you about the price that you should demand. You should know what methods your broker uses for estimating the price of your business. Scrutinise the broker’s past performance with a focus on the price demanded and the price realised for previous sales.

Look at Other Credentials

Every credible company has a website these days; your broker should have one too. The broker should be easily accessible and willing to help you with every detail of the sale. It is very important that you talk to business owners who have hired that same broker in the past. By working a little harder while hiring a business broker, you’ll be saving yourself a lot of hassle later. If the broker is incompetent or not committed, you run the risk of selling your business cheap or losing the sale altogether. Make sure that your broker hasn’t been sued and is under no current litigation by any buyer or seller.

Signing the Contract

Most of the brokers will want you to give them exclusive representation. Once you sign the agreement, you wouldn’t be able to engage any other party or broker for the sale of your business for a certain period. This period could be six months more. However, if you have a personal approach to some buyer or are already negotiating the sale with a partner or friend, you may include an exception in the contract in consultation with your broker. Make sure that the contract is concluded as the sale takes place, and there are no outstanding or long term liabilities against you.
Many brokers will also be willing to help you prepare the documents for a business sale without requiring you to sign up and get listed with them. They would complete your paperwork for a fixed charge, and you can decide to retain the later for the conclusion of the sale. It would really depend upon whether you have a buyer already interested. If you don’t have a clue about who will buy your business, it is advisable to go ahead with a seasoned broker.

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”

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How to value a business – an alternative way

Value a business by Calculating your Walkaway Price

I’ve found that the majority of business exit articles focus on how to value a business by using accountancy methods to work out how much your business is worth. I’ve written about those with our ‘quick and dirty’ Discounted Cash Flow (DCF) and multiples articles too. But what isn’t discussed at all, or at least when I was going through my business exit, is what is the rock bottom price tag that you would accept for your business and how you would go about working out what yours is. Do you already have that figure in mind? I call it your ‘walkway price’.

It’s your walkway price because during your business sale negotiations if the figure hovers around a number that is lower than your walkway price guess what you’ll do. That’s right, you’ll glance down at your walkaway price crib sheet for one last check, get up from that negotiation table and walk away in the full knowledge that you know that your business is intrinsically worth more than what’s been offered.

As I discovered, it’s really worth calculating your walkaway price because it will help you understand the reasons why you want to sell the business, sanity check that your desired sale price is realistic and most importantly it provides an invaluable reference point when you’re experiencing the ups and downs of selling.

The earlier you can take the time out to work out your walkway price the better because you won’t have time during the sale process and logical, reasoned statements may not be that easy to come by because you’re caught up in the process. It’s one of those things that until you’re in it for real, you can’t picture it. Calculating my walkaway price was the best thing that I ever did with my business partner before the business sale process began. I only wish that I looked back at our crib sheet more often during our sale process. It would have saved us going down a few dead ends.

Now there are countless ways of getting to that figure. You can use the DCF and multiples formulae to help you or work back from a figure that you have in mind and see if all the costs and what you want to do with the money ties in with that figure. I really believe that all business owners should have their walkaway price ready to hand so I created a pack called ‘Calculate your Walkaway Price‘ to help other business owners get there too which can be purchased from our online store.

If your sale process takes a long time like mine did (nearly two years), then you need to make sure that you re-evaluate your walkaway price at least annually. This way, you can realise any  new value that you’ve created in the business as you’ll find that getting your house in order makes it more valuable. Which, in turn should increase your price tag.

One final thing, my advice would be to keep this information private, even from your professional advisors. The walkaway price should be considered as a last resort measure only to be undertaken if the price tag doesn’t meet your calculated expectations.

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business. Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”.

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How and why you should avoid poor service, high volume business transfer brokers

Business Transfer Brokers

If you’re selling your business for under £1 million, there’s a reason to avoid the high volume business transfer brokers!

Selling a business is similar to most things in life. If you’ve got the money, chances are you’ll get a better service and a better outcome. When it comes to selling a company below £1 million it’s often unlikely that a business owner will recruit a professional team to help with the sale. The process is long and the fees are high.Furthermore, the business owner wants to walk away with as much profit as possible!

That being stated, what kind of service does a business owner selling for under £1 million get? From what we’ve discovered it’s not very good at all – and worse, it can be very costly too. Not being an expert in this area, I contacted Andrew Weaver, the founder of SellMyBusinessOnline.co.uk to give us an insight on the market and what he’s doing to change the poor service levels and high costs that are currently on offer.

Joanna: Is it possible to get a high value service at a low cost?

Andrew: I have been involved in corporate deals for 10 years.  Selling a business is rarely easy nor quick.  The process is demanding of both seller and advisor with the result being that good quality advisors gravitate towards the size of deal and client that can justify their time and fees. As a very general rule, this tends to be businesses with turnover >£1m.

The vast majority of businesses fall beneath this radar and have traditionally instructed volume transfer agents who, because selling a small business can be challenging and time consuming, provide a service that is as much about protecting their time, as driving best value for the client.  It’s a model based on committing sellers to exclusive contracts, high up front fees and/or large commissions at sale.  Often, for little more than a matchmaking service. I founded Sell My Business Online to help those businesses with <£1m revenues and provide a better service.

Joanna: How have you successfully provided a high value service at a low cost? 

Andrew: Here at Sell My Business Online what we’ve done is create a bottom up service by streamlining the process focusing on the high value unique elements of the process. We’ve removed the need for an exclusive broker contract, invited clients to build up the level of cost and expertise as relevant to their own particular sale process and provided a low cost access to the market via our marketing channels.

Joanna: Can business owners sell without a business transfer broker?

Andrew: Yes! Sell My Business Online is a marketing and sales ‘support’ service.  We enable businesses to get to the market efficiently and cost effectively. There is no agents contract to sign and no agents commission to pay. Clients can purchase additional advisory services by the hour, if required. We can also step into a mandate at anytime, if the vendor feels out of their depth.

We don’t advocate a DIY service for all businesses.  Many business require a much more detailed and sophisticated marketing approach but Sell My Business Online is ideal for the smaller business and straight forward deals.

Joanna: What advisory services do you offer and how much are they?

Andrew: Sell My Business Online is supported by MBA qualified team of corporate deal brokers: Daresbury Company Solutions.

We offer a marketing service at £95 and a £495 advisory service. Most clients start with our advisory service and build up the expertise as required, including using our more traditional advisory services which include buyer research, deal facilitation and mentoring.

Joanna: What are the top 3 tips for business owners looking to sell within the next year?

Andrew:  1)  Good preparation makes all the difference.  Try and sell close too or just after year end – all your numbers are fresh.

2)  Don’t fix price expectations on pre-sale valuation or (worse) on what you need.  Prepare well, have a good marketing campaign and the value will follow.

3)  Be sympathetic to a buyers’ anxieties. You know your business inside out, the buyer doesn’t and buying a small business can be fraught with risk.  The best deals come from parties who are open, communicative and understanding with each other.

So there you have it. It is possible to avoid poor service from high volume business transfer brokers and there are providers who specialise in the <£1m market with a more tailored and open approach allowing business owners to research the market first without having to commit to a broker and their fees. If you would like to know more about Andrew and his company visit SellMyBusinessOnline.co.uk

 

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”

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Understanding the importance of the data room

Understanding the importance of the data room

Before

Had you been selling your business before the age of the Internet, you would have set up a physical data room for due diligence of your business records by the buyers. A data room becomes necessary when there’s a large amount of confidential data that you want to share with your prospective buyers for the process of due diligence. In old times, this would be a closely guarded room with copies of all documents that are requested or desired by your buyers during the process of business sale. Only one party would be allowed to visit the data room for due diligence of records. In case extra copies were needed, they would be provided after keeping a proper record, so that no information fell into unwanted hands.

Now

Setting up a physical data room is time consuming and expensive (take a look at our data room structure sample in our Free Document samples section). At times, the advisors and accountants of the buyer may have to be flown in from another city just to scrutinise the documents in the data room. Thanks to the Internet, these days, companies establish online or “virtual” data rooms that are accessible to all interested buyers through the Internet. A virtual data room is simply a secure website that contains all the required documents from your company. Some of these documents may be highly confidential, so a virtual data room has fool proof security against hackers or unauthorised access. The people who are authorised to access the information are given login IDs and passwords. Also, you can assign different clearance levels to different people, which means that a person can only access the documents that are required for diligence by that person. Restrictions are applied on dissemination of information through copying or printing.

Although a physical data room still becomes necessary in some highly secretive deals and government contracts, the increasing speed, ubiquity and security of the Internet has made it quite economical and convenient to establish a virtual data room. When you are going for a business sale, many bidders may be interested in your offer. If you have more buyers and all of them are asking you for different company documents for carrying out the due diligence of your business standing and claims, it becomes problematic to deal with them separately. Your data is confidential, so providing your documents to the bidders individually will loosen your control on your confidentiality. Moreover, responding to the buyers’ request becomes cumbersome and requires dedicated resources. The process of enquiry and response is also more time consuming. Your buyer may be in a different part of the world and may require access to the documents at odd hours. All these problems can be solved by simply establishing a virtual data room, which your buyers can access 24×7. Providing logins and passwords to each one of your buyers ensures tight control, as you are all the time aware of who is looking at which particular document. The documents that contain sensitive information can be shared only at key moments, with key people.

A data room multiplies the chances of making a bountiful exit from your business, as your potential buyers can find the documents at their convenience. Also, a data room indicates that you are indeed serious about selling your business and want to keep the whole process as transparent as possible. By being more open with your documents and data, you are basically showing your confidence in your business and your respect for the requirements of your buyers. Your data room will be used by the buyer’s acquisition team, who may belong to finance, legal, and other departments. It can be hard to respond to requests from all these quarters if you haven’t  thought through and established a virtual data room and in the worst case scenario the deal could collapse with a nervous buyer if you were unable to provide the evidence in a timely manner.

In summary here’s why virtual data rooms are very effective during business sales:

  • More buyers become interested in your sale proposal when they know that you will provide them access to all relevant documents through a data room.
  • If you have given some time limit for bidding, having a virtual data room can increase the number of bids that you receive, as more people will be able to access your information, which is available 24×7.
  • You can have the knowledge about what your bidder(s) is looking at and understand the intentions better.
  • The business sale is accelerated as no time is wasted in requesting for and gaining access to the documents.
  • A virtual data room provides better control on data and the people accessing that data. You can apply digital rights management and prevent the documents from being downloaded or shared with unauthorised people.

So if you haven’t started getting your data room together now’s the time to do it and to help you, we’ve got just the thing that will make it easier for you and help you understand exactly what you need to do and what costs are involved, Creating the Data Room Pack which also includes a zipped up data room structure to get you started.

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”

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What’s in a business sale teaser letter

business sale teaser letter

(Extracted from ‘How to Sell A Business‘ book)

Why write a business sale teaser letter?

The purpose of the teaser letter is to make the market aware that your business is ready to be acquired, should the right opportunity arise, and to identify potential interested buyers.

It is generally a two page document, which is written by your business broker (as one of their agreed deliverables for their fee) with your input, to showcase your business to potential interested parties who may or may not be actively acquiring businesses at this precise moment in time. The letter will most likely contain the following:

  • The broad type of business it is
  • Your headline financial figures (profit, revenue)
  • Reason for sale
  • Outline the opportunity without mentioning names
  • Specify what type of transaction you want, ie. full sale, investment, management buyout
  • Your broker’s contact details to request more information

The teaser letter should avoid stating an asking price or even a range. You don’t want to put someone off before it’s even begun. If you would like to see a teaser letter in all its glory, we have an example here.

Depending on the potential buyer’s organisational structure, your broker may make a call before sending out the letter.  The letter is normally sent directly to the managing director/chief executive, to the financial director, or to the acquisitions manager/director.

What happens next?

After sending out the teaser letter, your broker will follow up with a call to find out if the potential party is curious and interested and what attracted them to your business. This allows your broker to discuss the opportunity in more detail and qualify the interest of the potential buyer some more. If your broker is not familiar with the interested party, they will check up on the company’s financials and work out if they have the means to pay-out, as well as see if there is strategic value in the potential acquisition. If the party is still interested, the broker will send the potential buyer a confidentiality agreement (a.k.a. a non-disclosure agreement) to sign before releasing further details.

 

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”

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How to Shortlist the Right Buyers to Buy Your Business

The Right Buyers to Buy Your Business

How to shortlist the right buyers to buy your business

Every year, thousands of businesses change ownership. Many of them are small ‘sized’ businesses, similar to beauty salons, cafes, restaurants, dry cleaners, quick-print shops, retail stores, landscapers, and tax advisory services to name but a few. And a handful are medium to large in size. Regardless of the business size, if you are looking for the right buyer to buy your business and desire to have the best deal possible, be ready to do a lot of preparation, planning and research beforehand, this will serve you in good stead.

Are you truly ready to sell your Business?

Regardless of what sort of business you have; be it a beauty salon, a certified services company, a retail store, or a home-based website that sells imported garden equipment, there is a good possibility that there’s an interested buyer out there (if the price is right). However, finding the right buyers to buy your business and selling the business on positive terms will necessitate planning and hard work by you – it will be worth it.

First of all, you must think about whether you’re really prepared to sell or not. To make the most of the opportunity you need to be prepared and understand  the business sale process and market trends. Know how to prepare your business for sale, how to set a realistic value, how to find prospective buyers, negotiate your sale, understand the paperwork and finalise the sale purchase agreement. Make sure you protect your business sale interests by pre-qualifying potential buyers.

Selling a business entails know-how of diverse areas as the process of selling a business is full of potential pitfalls. Business owners must be confident enough that they are making the right choice and decision by selling their business to get the best price, given current circumstances and their realistic interests. Make sure that the fact that you are selling is not an unintentional response to the receipt of an alluring offer. Even if an enticing high offer has landed on the table, check it out first and qualify it before giving into the enticement easily as you could be led down a garden dead end path.

Potential buyers – weeding out the time wasters

When you are sending out your business sale teaser letter and trying to lure in buyers through advertising or word of mouth, you may receive many responses from interested parties that are not the right buyers from your point of view. Talking to too many unworthy buyers may delay or even stall the sale and your time is precious so don’t waste it. The method of selecting the right buyers for your business is called pre-qualification. Professional business brokers generally do this job of short listing the right buyers to buy your business, but if you are planning to do it yourself, you must have your pre-qualification plan prepared. Don’t be surprised to find that 90% of interested parties won’t have the purchasing power to buy your business. We came across that 90% during our business sale process.

Maintain confidentiality throughout

If you are dealing with too many buyers, its difficult to maintain confidentiality and your sensitive business information may be visible to more people than you may feel at ease with. Consequently, by not satisfactorily screening out inappropriate buyers, you risk exposing your business secrets that may possibly have a harmful consequence on the potential financial performance of the business.

Shortlist the right buyers for your business

You need to recognise the significance of choosing the right buyers to buy your business. The right buyers should have the following qualities:

  • You have verified that they can afford to purchase your business
  • You believe that they want and need your business ie. they realise its value
  • You believe they won’t waste your time
  • You believe they won’t disclose sensitive data to others

It’s worth saying twice, make sure that the potential buyer has the financial capability (cash!) to pay for your business, in full, today.

A business sale can be an exhausting process (it was for me!), make sure that you relieve some of that pressure and stress by being prepared and shortlist those potential buyers through qualification. Become familiar with the business sale process, know how to whittle down the buyers list, learn about the pitfalls and how to avoid them – its all covered in my How To Sell A Business eBook.

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”

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The 10 Largest Business Sale Deal Breakers

Business Sale Deal Breakers

Business Sale Deal Breakers

If you are on the verge of a business sale deal, be careful. There are many slips between the cup and your lips. You should make sure that you toast to a successful deal, and steer clear of the pits and traps that can ruin your hard work and make your business sale deal crash. Most of these business sale deal breakers appear benign and common sense, but you should remember that sometimes common sense can be uncommon. Being aware of these deal breakers will prepare you to better  identify and avoid such threatening situations that could blow a business sale deal. So, what are these business sale deal breakers? Let’s take a look at 10 of them.

1. Wrong Data
If the data you furnished to your prospect buyer is bad due to any reason, the impact might hit you when you least expect it. Make sure that you check out all figures and think about the information that you’ve supplied. There might be a temptation to blow up sales figures or show less expenses, but bad data, whether intentional or not, can stall your business sale by making your whole business suspicious in the eyes of the buyer. To avoid this pitfall, be open and straightforward right from the beginning.

2. Claim against your business
If your business or any of its assets have a claim against them, it may sink your prospect of making a sale if you haven’t revealed it in your documents. Even if you have mentioned it in the data, a claim reflects poorly on your business. Try to get rid of the claim before going for a business sale, or have a good justification accompany it when you reveal it in your docs.

3. Cover Up
If you have been sweeping problems under the carpet, it’s time to clean up your act. Get your records straight and get rid of any existing and impending issues that might threaten the business sale. Some of the issues can be outstanding debts, employee turnover, or sales slowing down. Covering them up would do little good, while being honest about them will make you think of ways to resolve such issues.

4. Deal Fixation
This happens when a business owner is too focused on the business sale, which may take months to go through. They ignore normal business activities and revenues dip. When the buyer asks for current data, the deal may go into a nosedive. Always focus on strengthening your business even while you are under the sale process. Making jumps in sales or news headlines while negotiations are underway gives you the advantage. Don’t get fixated on the deal to the extent that you let your business suffer.

5. Lack of Preparedness
Being unable to answer a key question during one of the meetings reflects poorly on you as a business owner. If you don’t know the strengths and weakness of your business accurately, it might also affect your negotiations and selling price. Not being prepared with the information and documents required for the due diligence, and taking too long in preparing them is the best recipe for driving away your buyer.

6. Excitement and Depression
A business sale is a tedious process and has its emotional impacts. You may be excited one day, and depressed the next. Sometimes it might appear that you are about to win the sale on your terms. At others, it might seem like an impossible task. As we all feel stress and emotions, there’s a chance you might say or do something that jeopardises the sale prospects. Don’t let your mood swings take the better of you. Always make decisions with a cool mind.

7. Competition
Although rare, competition can and does wreck business sales. This can happen when you have several other businesses like yours offering to sell. If you anticipate this kind of a situation, you should make sure that you offer the buyer some unique propositions or benefits in order to keep the buyer from getting interested in competing businesses.

8. Laws and Regulations
For overseas business sales, certain ownership or transfer laws may be applicable. There may be laws in your particular industry that spell out the requirements for a business sale. If you and your buyer are not aware of such laws and don’t fulfil the requirements, this may come as a roadblock to your business sale.

9. Scams and Scammers
Some companies may offer you a very lucrative deal for selling your business. Such companies, which may be posing as buyers or solicitors, would ask you for a deposit or upfront payment on any context. Make sure that you check all details about the person or firm that you are dealing with for your business sale. Don’t fall for a scam where you end up losing money or wasting time, or both.

10. Delays
Delays, regardless of their causes, will always have a negative effect on your business-sale proceedings. Don’t let delays happen. You can do this if you have planned your sale well.
Working with an experienced and competent business sale solicitor can save you from many of the pitfalls mentioned above.

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”