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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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5 Key Due Diligence Requests To Prepare for Now (before you sell)!

Due Diligence Requests

Due Diligence Requests5 Key Due Diligence Requests

Due diligence is the analysis and investigative process that follows an offer or letter of intent from the buyer. When you make it to this stage it’s safe to say that the buyer is serious.

The idea of due diligence is to evaluate the potential opportunities and risks of the purchase, and discover any other particular issues. Once completed, due diligence will facilitate the buyers team to manage their thought processes efficiently, so as to deal with and prioritise the decision-making procedure. It will ultimately lead to optimising any deal terms while recognising and addressing risks linked with the transaction.

It’s important to understand that due diligence does not merely entail gathering data and checking boxes. Largely, achievements are based on the worth of future cash flows. Your buyers will need to determine the worth of the particular assets that they are buying or the responsibilities that they are assuming. They will want to analyse the data in the perspective of how upcoming cash flows will be influenced by the issues examined. Due diligence items not only include the hard information that your buyer requires to measure prospective financial, legal, and regulatory experiences, but also provide insights into your company’s physical structure, prevalent practices, available human resources, operational processes, relationships with supplier and customer, competitiveness in the market, and future outlook. Following are the main items required for the purpose of due diligence by the buyer.

Due Diligence Request #1: Sales Forecast

The sales forecast is of utmost importance in a business plan, revealing the detailed forecasted sales for your company. Almost all companies require producing forecasts of their short to medium term sales. Sale forecast is of special attention to potential investors eager to gauge the dimension of a prospective purchase. It is one of the most cared about Due Diligence items requested by the buyer’s team. On the other hand, it is also a complicated section for entrepreneurs to prepare, as they might not have historical statistics upon which to base their forecasts. The key for business owners is to build some reasonable assumptions that they can support. Preferably they must look to discover benchmarks, hence aligning their figures with other businesses in the industry. Sales forecasting need not be 100 % accurate, as nobody can foresee the future. Sales forecasting is intended to assist your buyers weigh up the existing and future demand levels, so that they can estimate the resources that would be required to make those sales. One massive thing to keep in mind is that whatever you supply to  the buyer you’ll have to make sure you can make it happen! Don’t inflate figures or you’ll really have a struggle on your hands when it comes to puting the proof in the pudding.

Due Diligence Request #2: Employee Information

The human resource being the most important and dynamic asset of any organisation, your buyers can’t overlook employee information. The employee information term is used for a broad and comprehensive system that keeps and tracks records pertaining to all the employees in an organisation. It reveals ample details related to their resumes, contracts, job descriptions, leave and attendance records, inter-company transfers and the workflow concerned during the transfer procedure, track of appraisals and promotions etc. It also includes  Recruitment, Payroll and Training Systems of employees in your company. Buyers will be looking out for key employees so it’s important to make sure they don’t jump ship before or during the sale.

Due Diligence Request #3: P&L and Balance Sheet plus Monthly Management Information

P&L and Balance Sheet are the third most important Due Diligence items requested by Buyer’s Team. To guide your business to the financial track you desire it to take, you need to understand where you’re earning money and where you’re spending it. That’s why you must maintain accounts and generate regular reports, including profit & loss account and balance sheet. Whenever you sell your goods or services to others, it costs you money to pay for the production of those goods and services. And, in return for those goods or services, you will be receiving money likewise. So, if you are getting more than you are paying for, you should be making a profit. This record is kept under profit & loss account.

Your balance sheet depicts the balance between your assets and liabilities. The balance sheet for your company provides a clear view of your business worth at one specific moment in time. Generally, it is done at the end of the financial year and provides you the situation of the company from one year to the next. However one can also draft monthly or quarterly balance sheets. Your buyers will be examining financial performance and weighing it against earlier performance. You should facilitate them in the process by providing any details that they request.

The Monthly Management Information shall provide a snapshot of the performance statistics available in the Management Information System on the last day of every month. It is usually posted several days after the ending of the reporting time. Your buyer would like to take a look at the MMI, so you should make sure that you prepare this document every month.

Due Diligence Request #4: Statutory Information on Company

Statutory information on company pertains to the information relating to its statute, code, or written law, which helps to understand the company infrastructure. This information is usually given in the memorandum and articles, and should not be a problem for you to and your team to create.

Due Diligence Request #5: List of Client Contracts

Your clients are your business assets. Consequently, a major part of being successful in business is to keep them close. The number and worth of your client contracts would determine the sale price for your business. Apart from scrutinising client contracts, your buyer may also like to know how you keep the records of your customers.

The Due Diligence aspect of selling your business is a lengthy and time consuming one. If you have time on your hands now, it’s in you best interest to prepare the information needed proactively rather than re-actively. In other words, sort this out now so that when it comes to crunch time you can put all your efforts on making sure you’re hitting the forecasted targets! At Sell Your Business, we’ve created a fantastic Due Diligence pack that will help you prepare. Don’t let the buyer or your team hold you to ransom – get one step ahead! Check out our Due Diligence collection today!

Kim Brown, Co-Founder of Business Wand, helps business owners navigate their way through the start to finish process of selling a business. Her specialty is to help owners cut costs and increase profits prior to sale. To understand how you can sell your business quickly for the highest sales price, purchase the 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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Taking The Leap – Going From Hating Your Company To Exiting It

Exiting My Business

Exiting My BusinessGoing From Hating Your Company To Exiting It

Deciding to exit the business I painstakingly grew for 8 years was the hardest decision I’ve ever made. And my decision certainly didn’t happen overnight – it was a drawn out painful process that took several months to make. And once I finally decided to exit it took over a year to process all the emotions I cycled through.

The emotional investment to my companies was similar to raising a child. I put all my energy, love and attention into doing the best I could. And to say good-bye was heart-wrenching.

I had so many conflicting feelings. I was so full of ‘shoulds’. I should be happy that I own and work at my own business – but I wasn’t. I should feel free, happy and alive, but I felt confined, miserable and lethargic. I should be grateful that I’m increasing my wealth yet I actually felt angry. I felt as if the troubles I endured weren’t worth the payment I received. In fact, I eventually came to the conclusion that no amount of money was worth the journey I was travelling.

My health was declining, my energy levels were getting lower and my relationship with everyone around me was suffering. I had built a successful business but it wasn’t successful in relation to who I was and what I truly needed.

In my quest for ‘success’ I mistakenly thought that financial freedom had to be obtained by sacrifice, hard-work and massive amounts of will power. I was taught that things don’t come easy – you need to get out there and do whatever it takes to make things work. I forced, cajoled, pushed and kicked my way to ‘success’ and now that I’ve exited I look back and think, ‘what the heck was I doing?’

No – it wasn’t all bad. I enjoyed the creative side of things. And I enjoyed all the marketing elements that I designed. There were some very special parts that I’ll always hold dear, but as a whole, my businesses ended up confining me rather than setting me free. That’s my fault. I created things to happen that way – I just didn’t know I was doing it.

When you’re so stuck in the mud it’s often difficult to see that life can be lived another way. Deep down inside I knew that I needed to get out. I needed to raise myself out of the mud but I was so scared. And I felt so alone. There was no one around to empathise. And for me to leave my businesses I also had to leave my business partner. Or at least put an end to our working relationship. My decision not only concerned my working life but also it meant I had to ‘divorce’ someone I was very close to.

But before taking a course of action things had to get so bad that I had no other choice. I became increasingly frustrated, angry and disillusioned. I felt as if I lost touch with everyone around me. I could feel my health get worse – I had already ended up in the hospital and took months to recover. I was going down and I had to exit before something serious happened.

Luckily I had some new friends that helped me make my decision. I announced to my partner I was leaving and then lived in a self-imposed hell for several months. I felt as if I was letting myself and everyone else down. I couldn’t tell the employees so I carried on pretending to be a ‘leader’ while the legalities were worked out.

Every other day I woke thinking ‘what am I doing’? I’m throwing away everything I’ve done and created. I’m walking away from the only life I know. And then I’d eventually remind myself that I needed to break away. I needed to find another way to live.

I was so alone. Or…at least, I felt so alone.

It’s now been a 1 1/2 years since I left and taking this time to reflect I’ve realised that my decision was a monumental milestone in my life. I had my ladder of success against the wrong wall. I was doing things that I thought were necessary to create success but I was so misguided. I’ve now realised that I don’t have to push, prod and force myself to gain an elusive reward in the future. I can actually flow, love and enjoy want I do now AND be rewarded. What a concept – eh?

As we get older we get wiser. I’ve learned so much over the past several years. I’ve learned that if you’re not enjoying the journey you won’t like the destination. If what you’re doing now isn’t working for you, don’t invest any more time or emotions into it. Get out. Switch direction. Figure out what does work for you. The longer you wait, the harder it will be to transition . And if you wait too long, something will force you to change. It’s better to voluntarily make the switch rather than it being made for you!

And if you say, ‘but I have a family to support – I can’t just jump ship.’ Well – when I made my decision to exit my business there was no certainty I would get an income. I quit my businesses without knowing if my business partner would buy me out or pay dividends. For months I moved forward not knowing how I was going to make money. And I am the sole provider for my family – I support my husband, my daughter and my father-in-law.

As luck or destiny would have it, my business partner agreed to pay for 60% of my shares over 2 years providing an income and time for me to figure out my next move. Things always work out. If we don’t take care of ourselves, we won’t ever succeed personally. And to take care of ourselves, we need to trust that doing so will create the best outcome for everyone.

Has the time come for you to exit? If yes, you’re not alone!

Kim Brown, Co-Founder of Business Wand, helps business owners navigate their way through the start to finish process of selling a business. Her specialty is to help owners cut costs and increase profits prior to sale. To understand how you can sell your business quickly for the highest sales price, purchase the 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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How to Stay Alert and Healthy When Selling your Business

How to Stay Alert and Healthy When Selling your Business

How to Stay Alert and Healthy When Selling your BusinessHow to stay alert and healthy when selling your business

Selling a business is a tiresome and stressful process regardless as to the reason for sale.  Whether it’s a distressed sale – selling due to health or personal reasons, or if it’s time to retire or move onto another adventure, the process can take it’s toll. And the ironic thing  is that a business owner needs to fire on all pistons during the process. Not only does the owner need to prepare and jump through hoops to make the sale happen, but they also have to make sure the business performs! How to stay alert and healthy when selling your business is a massive factor on achieving success.

By now, we all know that stress sucks. From a scientific point of view, stress stimulates your body to secrete more adrenaline. Once it enters your bloodstream, adrenaline increases your breathing rate and blood pressure. Inevitably a person experiences physical weaknesses. With prolonged stress the body breaks down and eventually becomes ill or worse, gets diseased.

Stress is a consequence of a slight alteration in the natural state of the body. So any technique to reduce stress is to help bring your body back to its normal functioning. Below are some ways that can help you to counter stress:

Sunny side up

Look on the positive side of things. The glass is always half full and half empty – it depends on which version you want to focus on.  You have the choice to focus on either. Keep in mind that there are millions and probably billions that have it far worse than you do. Count your blessings and remind yourself of all the great stuff you have in your life. Gratitude is a massive stress-buster.

Rest your way out

Some people fight stress by working towards resolving it. The ancestry of stress is usually over exertion so this in turn increases your brain-strain. Experts argue that taking a nap or simply resting while on a stressful routine can ease you out. While sleeping, the lobe of your brain responsible for voluntary thinking relaxes, hence it relaxes you. When I exited my company, I took up the practice of meditation. I couldn’t just sit in dark room for a 1/2 hour focusing on nothing, so I opted for ‘guided meditations’. Guided meditations often have nice music and someone talking you through a relaxation. You can download these over the Internet – they have mediation for everything. Stress reduction, enjoying life more, business success and so forth. Taking a 1/2 to focus your mind in a positive direction can work wonders.

Take a break

Remember to add short breaks to your fore-planned schedule. Go out for a jog or follow an influential personality on twitter regularly. Grab a book of your favourite author or start taking special interest in gardening. These activities will clear your mind out. Cycling, swimming and taking a brisk walk are effective stress relief exercises. Yoga is known for restoring the natural spiritual and physical state of the body. It might feel counter intuitive to take a break when you have mountains of work to do, however it will help to keep  you sane. What’s more important? Your health or your work load? And strangely, you might discover that the more regular you are with your breaks, the easier and more productive your workload becomes.

You are what you eat

Take a healthy diet throughout the day. Water should be an essential component of your diet as it acts as a stress relief agent. Curb the consumption of alcohol and caffeine. (On this point, I have to admit, I couldn’t do that! I would have never survived without my 7am Latte and 6pm glass of wine!) I did however, eat salads, as much non-processed foods as possible and opted for healthier choices when I went out to eat. Think of it this way – you’re body is already stressed…don’t give it more problems to deal with.

A shoulder to cry on

Articulate your feelings instead of hiding or bottling them up. Find a good friend, mentor or family member to talk to.  By exchanging comments and suggestions, you will gain exposure to a variety of ideas. Try your best to surround yourself with jolly people who live life optimistically. And stay away from people who make you unhappy and spread negativity as it can further strain your already stressed out brain. Develop a sense of humour and laugh for no reason at all – never loose an opportunity to smile. There’s a form of laughter healing – I can’t remember what it’s called but on certain days at a certain time a bunch of people all join a teleconference call and laugh. (Yes – this happens in the UK believe it or not)!

Give nature a shot

Once in a while, take a small trip to a place with a lot of natural vegetation and less noise. Take a walk and breathe in the natural scenery. Take a nap under the open skies and feel the nature around you. Once you get back to your daily routine after breaking its monotony, you will certainly feel lighter. Every time I go for a walk in the woods I often thing, ‘why don’t I do this more often!’ Just surrounding yourself in nature has a calming effect.

Last resort

Selling a business is an exasperating process. Running a business while trying to get the fairest sale deal can make anyone anxious. Stress builds up in your mind and body and leads you to experience physical deficiencies. If it gets to be too much seek professional help! There’s nothing and no one more important than you. If you go down so do the people around you so remember to put your health above all else!

Kim Brown, Co-Founder of Business Wand, helps business owners navigate their way through the start to finish process of selling a business. Her specialty is to help owners cut costs and increase profits prior to sale. To understand how you can sell your business quickly for the highest sales price, purchase the 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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Interview: Lessons Learned From Selling A UK Business

Lessons Learned in Selling a UK Business

Lessons Learned in Selling a UK BusinessWho better than to learn from one of the Sell Your Business co-owners, than Joanna! She can rightfully offer lessons learned from selling a UK business!  I interviewed Joanna in the hopes that her experience will shed some light on various factors that might be able to help you or prevent you from making mistakes.

Lessons Learned From Selling A UK Business

Kim: What was your original business exit plan?

Joanna: The original business exit plan was actually not to exit! It was to focus on getting the company to a position where it remained very profitable and could run without me at the steering wheel. I was hoping for an arrangement that would allow me to go do something else while the business continued to generate income for me and my partner (who was also the majority shareholder).

Kim: Well, that being the case, what triggered your desire for a business exit?

Joanna: I was looking for options to reap the reward of the hard work that I had put into the business. I mean, of course, I wasn’t in the business for the sake of business, but I have some personal goals too. However, it was my business partner’s sudden need to cash in and de-risk for the sake of his family that was the main reason for our deciding to sell the business. I would class our business exit as a distress sale as we allowed circumstances to dictate the sale instead of choosing our window of opportunity.

Kim: So, are you saying you didn’t have enough time to plan?

Joanna: Yes. We sort of tried to rush into the sale and discovered many things as we went along. This wasted a considerable amount of time and energy. We were looking for the buyers, preparing documents, and doing our usual business all at the same time which included market entry into the US! I think if we had given more thought to the business sale, things could have been much easier.

Kim: How did you find the process emotionally?

Joana: Exhausting and emotionally draining to the point where I couldn’t function outside of work as I only had just enough energy to keep the business and sale process going. It was a long 22 months as only 3 people (including myself) in the business out of 40 knew we were selling it. I akin it to a never-ending boxing match with unlimited rounds and varying lengths of timed rounds, feeling the effects of punches and rarely being able to punch back and control the round. I was barely dragging myself around by the time we entered the negotiation stage. It can take a lot of time and energy. There’s just no way around the stress and the long hours, I guess. I tried to keep my focus and manage my schedule, but 22 months is a long time.

Kim: What was the final outcome?

Joanna: We made an endless number of presentations and held umpteen meetings, but were frustrated every time. After the last sale attempt fell through, I left the business as an employee. I felt I had nothing else to offer and hated the business and what it had done to me. I was running on empty in terms of energy levels. My business partner stayed behind and 2 months after I left the business, it was successfully sold for millions.

Kim: In hindsight, what are the top 5 things would you have done differently, if anything?

Joanna: Very difficult to answer, as I was the minority shareholder and really had no decision making power, even though I was listened to from time-to-time. However, having seen the business sale process up close, I can say that if I was the majority shareholder, I would have:

i) Refused to enter the USA market while trying to sell at the same time as the US was a massive distraction and took a lot of my time. I would have focused on our core business and our core business only because we needed to prove that we were  over-achieving our forecast numbers and I could focus my attention on the business sale process more.

ii) Chosen to have more time to prepare to sell. This would have saved me from trying to juggle two full-time roles at the same time and truly focus on aspects of the business that would have maximised its exit value more.

iii) Not been greedy and be more aware of deal fever – I would have looked at what the realistic multiple was before short-listing offers. I would have accepted offers as they were above walk-away price tag despite the offer being made by a competitor. I should have also been wary of the big 7 figures that were being thrown around but emotions were on a roller coaster ride and energy levels were on low. Conversely, I would have walked away when the offer was lower than the walk-away price because the business’ intrinsic value was worth more and would give us a better return than say investing that cash in a different instrument e.g. stocks, property, etc.

iv) Told my senior management team that the business was for sale because I trusted them. This would have taken the pressure off myself having to personally keep the data room updated, make up a number of cover stories as to why I wanted certain information from the rest of the business, and I wouldn’t have to have hold all the technical and operational meetings with prospective buyers by myself.

v) Loved to have kept a detailed diary during the sale process as events got a little blurry and as the offers came in it was difficult to remember what happened when and why. A diary would have also helped me have an outlet for my emotions and would have been useful remembering if certain meetings went well or not.   

Well, well…You can see that business sale is treacherous territory. Joanna was frustrated by the market expansion side-by-side with the business sale, but the owner was probably trying to maximize the sale price. Patience is key, and preparedness necessary.

Kim Brown, Co-Founder of Business Wand, helps business owners navigate their way through the start to finish process of selling a business. Her specialty is to help owners cut costs and increase profits prior to sale. To understand how you can sell your business quickly for the highest sales price, purchase the 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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How to visualise your bountiful business exit

Visualise your bountiful business exit

Bountiful_Harvest_1440x1080Visualise your bountiful business exit, it’s worth it. Einstein considered imagination to be more important than intellect. Before doing an actual experiment, he would visualise the experiment in his mind, thinking about each and every detail and the whole sequence. As a result, he was prepared for the minor or major problems that he could encounter during the experiment. Establishing your business takes a lot of effort. It is only fair for you to consider a bountiful exit when selling your running business. However, like everything else, a business sale also requires a proper strategy. If you are well prepared, your business sale will conclude smoothly, with maximum returns for your hard work. The best way to be prepared for a business sale is to visualise successful business exit.

Visualising the Solicitor

A good advisor can make the difference between a successful or stalled business sale. Apart from looking at qualifications and experience, you should also visualise yourself to be working together with your solicitor —preparing a sales pitch, drafting a Memorandum, finalising Heads of Terms, and most importantly, negotiating. Try to imagine what working with your advisor will be like. This will help you in choosing the solicitor that you feel most comfortable working with.

The solicitor I chose was a word of mouth recommendation. When we first met, he spent quite some time with me outlining my options, explaining the process and cover potential costs. During our discussions I felt that he was genuine, straightforward and able to help me get what I wanted. As the sale process progressed I often visualised leaving my solicitors office with a big smile. And towards the end I pictured myself hugging my solicitor (and he’s not really the huggable type)! Looking back now, I remember the day clearly when I got up from the boardroom table, concluding the deal and wraping my arms around my solicitor. What a great day!

Visualising the Sales Pitch

The sale proposal is the first thing that you are going to need. It is also known as a Memorandum of Information. The memorandum should be prepared very professionally and should be a lucrative document for the buyers. It should emphasise the strengths of your business, and underplay the weaknesses. But, everything should be done artfully. You can improve the impact and quality of your  document by adding graphs, charts and other data that looks credible. Try visualising that you’re that the buyer rather than the seller. Think about the points that you, as a buyer, would like to see in the Memorandum. Your solicitor will also give you valuable advice, but it’s you who should be calling the shots rather than just towing the line that your solicitor gives you.

Visualising Meetings

You’ll be required to attend many meetings with the buyer’s team, during which you’ll be asked to explain different parts of your business. Before the pre-completion day, there may be a number of negotiation sessions to finalise the prices, payment terms, and other terms and conditions of the sale. Visualising each such meeting beforehand will make you better prepared to handle them.

Never show that you are desperate to sell your business. In fact, you should give the impression that there are other buyers also interested in buying your business. Remember that a delayed sale is usually a declined sale; therefore, you must do everything to speed up the sale process. Do not be available for meetings too readily. It might make the buyer think that they are the only party interested in your company. Rather, schedule appointments for meetings and inquire about the agenda beforehand. Some companies launch a media campaign just before they send out a sale memorandum, so as to improve the image and the potential price of their business. Visualising a successful business exit is about visualising each one of the activities right until the pre-completion day point.

Visualising Negotiations

For negotiating the terms and the price, you should first sit together with your business sale team and your business broker. Brainstorm your priorities about the price, and know the limit to which you can show flexibility to. Identify the weaker aspects of your business and be ready to answer tough questions. Remember, that your buyer will focus on the weaknesses of your business in an effort to reduce the price. You should be prepared for the counterarguments. You can either focus on your strengths and show that they offset your weaknesses, or you can find ways to underplay your weaknesses and convince the buyer that the price that you are demanding is profitable for them. Visualise negotiations always ending on a positive note where both you and the buyer walk away satisfied.

Visualising Indemnities, Warranties and Representations

The most sensitive aspects of a business sale are the representations, warranties and indemnities that you provide in your documents. A representation is a statement about a certain fact or aspect of your business. By giving a representation, you are taking responsibility that the information that you are providing is true and authentic. Similarly, the warranties that you issue are assurances about some aspects or assets that they have been correctly stated. Any wrong information from your side for which you have provided a warranty, will put you in the breach of the sale agreement. Indemnities are also similar; however, while indemnifying your buyer, you are taking responsibility to compensate the losses that the buyer may suffer in case a particular term of the agreement is breached by you.

Before issuing indemnities, warranties or representations, you should visualise the ramifications of issuing these documents or including these clauses in the sale agreement. It is best to keep the warranties and indemnities to a minimum. And when you do have to issue them, make sure that they should not keep troubling you even after you have sold your business.

Finally, you can visualise having a vacation at your favourite destination after you have successfully exited from your business. Do this from the start!

If you’re approaching an imminent completion day, have a look at our  Completion Day Checklist. It’s provides everything you need to know and do for the big day.

Kim Brown, Co-Founder of Business Wand, helps business owners navigate their way through the start to finish process of selling a business. Her specialty is to help owners cut costs and increase profits prior to sale. To understand how you can sell your business quickly for the highest sales price, purchase the book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”