Posted on May 20, 2013December 25, 2018 by Joanna Miller — Leave a comment

How to find the best broker to sell your business

The best broker to sell your business

A lot of work goes into making a business successful. But nothing lasts forever, even if your business is something you love and watched grow from a tiny baby start up into a fully grown adult money making machine. There comes a time when you want to sell that business.

It may be that you want to work in another sector or want to retire. Whatever the reason you need to ensure the process runs as smoothly as possible and the most effective way of making sure this happens is by finding the right broker company.

Consider your Exit Strategy

A lot of people who run seminars or give talks on running a business will talk about having an “exit strategy.” This is when people decide when they want to leave a company and how they intend to do it. However people are only human and the odds are when you work every day on your business you may not have thought of the practical steps needed when you need to sell up with a vague “some time in the future” in your head.

The temptation then is that when you finally do decide enough is enough you may decide to go it alone. After all you’ve set it up and made money for yourself why can’t you sell it yourself?

The reason this approach is not as effective is quite simply the law of averages! If you try and sell a company on your own then it is likely you will only be able to deal with one potential buyer at a time. The danger of this is that if a deal falls through it can mean going back to square one all over again each time, adding further stress and work that you don’t need when someone else can handle it for you!

A broker can deal with a number of clients at once because…well it’s their job. Even if you are robot level efficient there’s only so many meetings you can go to. Depending on who you go with they can also assist on the marketing and finance side as well, all things that could potentially screw up a sale.

Hold A Talent Contest or Beauty Parade

All of these aspects need to be considered when comparing the various types of company broker available to you. In some respects it is like a talent contest and you are the judge- therefore it is up to you to ask the right questions!

The most important question of all is- can you give us references? They ought to be willing to give proof of any claim and be able to supply you with convincing evidence that they can do what they claim to do. Trust your instincts- if the reference seems dodgy, look elsewhere!

Another aspect is the valuation- if they offer a figure that is too high or low then it is best to avoid them. In both cases there is a danger that they have an ulterior motive so it is best to do a little detective work to see the facts behind the figures.

Also get them competing! Don’t be afraid to get ruthless – get a couple of quotes and then call them back saying what the other one offered.

(Note: In the Sell Your Business Store, we offer a beauty parade pack to help you ask the right questions to obtain the best broker, solicitor and financial people!)

The Small Print

ALWAYS READ THE SMALL PRINT!

The odds are they will have various fees that they charge for their work. Do not take what they say at face value.

Part of the problem is finding people you know are reliable, rather than hoping that the people you are contacting are real. Anyone can create an official looking website and anyone can dress up their service with fancy sounding jargon.

Business networking groups are ideal places to go for this- someone usually knows someone else and if they genuinely like the service they offer then they will tell you!

Stay in touch

Even the surest of deals can go down due to unnecessary delays. One of the most frustrating things is to find your perfect deal went wrong because someone didn’t check their email or didn’t respond quickly enough to a phone call.

If the broker is in your local area, pop into their office unannounced before you do the deal. See how they handle the day to day running of a business. Look at the way they arrange their desks, the way they talk with each other. If your business sense starts tingling the odds are something is amiss- in some respects it’s like courting and it is up to you to read the signals to see whether your potential broker is the perfect date or the perfect dud!

Checklist for choosing a broker

In short there are a few things to check over before you choose a broker-

Know your exit strategy
Set a time frame
Do your research
Is their approach appropriate for your business?
Can they offer assistance with marketing and financing?
Ask for testimonials
Ask about fees upfront
Is their valuation realistic?
Compare at least three different company brokers.
Ask around at local business networking groups.
Make sure they stay in touch with you and keep in contact during the selling process.

Another thing to remember is that there are no guarantees and no broker can promise you definite sales. But like any investment in your business doing your homework and comparing all your options will give you the best possible chance. While it may be hard waving goodbye to your grown up company you can do so knowing it’ll find a good home!

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”

Posted on May 17, 2013August 12, 2013 by Kim Brown — Leave a comment

Top 10 Negotiation Techniques to Use When Selling Your Business

Negotiation Techniques to Use When Selling Your Business

Imagine having to explain to an alien the concept of money. There was a time when this meant that bits of paper and little metal discs equated to a value of so many items of food, clothes, vehicles and so forth. Now with credit cards, electronic transfers etc figures on a screen equate to value.

The point is that someone somewhere along the line decided these things had value and had to explain that. Likewise when selling your business it is up to you to find a way to show why your personal pride and joy that you spent years working on is worth someone taking off their hands. With these Top 10 Negotiation Techniques you can get the maximum amount when you want to move on to pastures new.

1. It’s Not All About The Money, Money, Money

It may seem counter intuitive but dropping prices is not always the best way to get people on side in a negotiation. Indeed sometimes pitching a lower price can devalue what you have.

Here’s a real life example:

A film maker goes to a potential backer with an idea for a film. He says that he can make this film for around £50,000. In his mind because this idea is brilliant and relatively low cost surely a business savvy investor will cough up, right?

Except in this case they didn’t. Film investments are notoriously risky and the people putting the money in want something that they think will make money.

So the film maker went to another meeting. This time the project was pitched at £2 million. And sure enough at this meeting his idea was taken a lot more seriously.

The point of this story is to look at the value of what you are offering to a potential buyer. Explain to them why you have set the price and only drop the price if you need to!

2. Aim high

“You should always aim high. What if you have low aspirations and goals in life and you don’t meet them?” Ricky Gervais

It is important that you do not misunderstand this one. Yes you want the best possible price. This is not the same as giving them a wildly unrealistic value just the highest possible calculations to give you the best deal.

You want to be able to start off high so you can move further down if you need to!

3. Do your research

When negotiating it helps to be prepared for the questions they are likely to throw at you. However this is not just about finding out what they will ask about you it is also about finding which of their buttons are the right ones to push!

For example, say you go on their website and it says they are looking to “expand into the Asian market.” If your business is particularly popular in that area you could say “Well if you buy our business this will benefit you more in this market because…” Take note of anything that could give you the upper hand!

4. Don’t split the difference!

It is the easiest option and the simplest of negotiation techniques- they have their figure, you have yours, meet in the middle. The problem is that meeting in the middle is not really what you are going for. Hold out for a little bit more!

5. KISS (Keep It Short And Simple!)

Deals can often get complicated and it is this that often causes those annoying frustrations and delays that end up hijacking negotiations and slam you straight back to square one!

Whoever you are dealing with try to spell out what you want and do your best to talk about minor niggles and worries as soon as possible so you can focus on the “This is the business, this is how much I want for it” part!

6. “Don’t give me problems, tell me solutions”

It is easy to define a negotiation as “us and them” If someone has concerns be proactive and find someone who can deal with an issue. For example if they give you a technical question you don’t know the answer to, find the tech guy and get them to answer it as soon as possible.

It may be a cliché but when it comes to selling a business time really is money, especially wasted time!

7. Give and take

While you want to get the best deal you also need to have a few tricks up your sleeve in order to make sure it goes through. If you are too tough with your negotiations people may end up walking away and then you have to start all over again!

For example, someone may want to buy your business but do not want to purchase your stock that is more than a couple of years old. You could say “Alright that’s fine then but in which case we’ll have a clearout sale and make money from that to fund our next venture.”

As ever in life it’s a question of balance- get the best price you can but don’t be afraid to throw in the odd freebie too!

8. Make the first offer

Common wisdom suggests that you ought to wait for your buyer to give you a figure and make the first move. However sometimes it is better to take the initiative and tell them what you want first. If they go for it then you could potentially save yourself a lot of time!

9. Know when to walk away

If you have done your sums right then you will know the most you would like to sell your business for and the lowest amount you are prepared to sell it for. Do not be afraid of walking away if a deal isn’t right. Trust your instincts! (Check out the ‘Calculate Your Walkaway Price’ Pack at our Store)

10. No table thumping!

There is a difference between being assertive and aggressive. Do not say that any terms are “non-negotiable” or insist on a deadline. Most deals go through when both parties are prepared to work together and come up with the right agreement. Subtle persuasion works better than tea cup hurling!

In short these negotiation techniques will help you to maintain the right atmosphere when discussing deals but more importantly will give you a better chance of selling at the right price. Good luck!

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”

Posted on May 17, 2013December 25, 2018 by Joanna Miller — Leave a comment

And The Best Time To Sell A Business Is…

The Sale Process Stages & Best Time To Sell A Business

The Sale Process Stages

Most businesses are for sale if the price is right. When someone asks, ‘Is your business for sale?’ I recommend you say yes. It doesn’t cost you anything, and it keeps the opportunity open for further exploration.

(Note: This is in excerpt from Chapter 1 of “How To Sell A Business: The UK’s #1 guide to maximising your company value and achieving a quick business sale.” Get the whole chapter for free by filing out the form to your right)

Exploring opportunities is one thing; entering into the business sale process is another. You definitely don’t want to go into it lightly. The process is costly and mentally and physically draining. It’s not an activity to enter half-heartedly by either the seller or the buyer. A high level of commitment is necessary from all parties.

The actual sale process may be longer than you think, and it involves a number of stages in order to maximise your valuation. The stages are as follows:

Making the decision to sell
Preparing your business for sale
Getting the right business sale team in place
Going to market to find a buyer
Carrying out successful due diligence
Completion Day and the after-party
Communicating the successful sale to the market

When is the best time to sell a business

In an ideal world, the best time to sell a business is when your business is on the up-and-up, still growing with a strong order book, running efficiently, managed effectively, and the going is good. The trick is to recognise this point as it approaches, and make the most of the window of opportunity when it arrives. My business partner and I always looked out for this window, and our indicators were our scarcity in the market, the number of clients with which we had contracts, the volume we were processing, and forecasting over the next few years. Even though we recognised the window of opportunity when it came along, we were a little late. This was partly because the business was going really well and everyone was enjoying themselves, and partly because our business sale process took longer than we expected.

The indicators for your business are likely to be different, taking a number of different factors into account, such as scarcity of your product and services in the market, the market size, future opportunity, profit margins (are they growing or shrinking?), and where your business is in the market cycle. It could even be that you have gone to see some venture capitalist (VC) companies who told you that you need a larger order book.

TIP: To make sure you don’t miss the boat, define the indicators to look out for, which show when the best time to sell is approaching. Make sure this is checked regularly, so have it as an agenda item at your board meetings.

If you are in a market cycle that doesn’t have a ‘best time to sell’ period coming up for the foreseeable future, it could still be the perfect time to sell. Just remember to choose your ‘ready to sale’ point very carefully by taking the calendar into consideration (more details in Part Five of the book — When should we go out to market?).

Posted on May 8, 2013December 25, 2018 by Joanna Miller — Leave a comment

How To Sell Your Business In A Downturn

“Sell your business in a downturn? Are you crazy?”

This may the reaction that you get from friends and family if you are planning to sell your business in the current economic climate.

It’s not as bad as it appears

Downturn, recession, depression, slump – whatever you call it, there is no doubt that the world’s major economies have been suffering a tough time over the past few years, and there are those that would suggest that you would be better to wait until the storm blows over. However, figures from the UK’s Office for National Statistics show that last year, the value of UK company acquisitions was over £20 Billion – so even if the figures are lower than previous years, there is clearly still plenty of opportunity to sell your business in a downturn.

So if you find yourself in the position of wanting or needing to sell your business now, there’s no need to listen to those who think you’re crazy. You may even find that the process is easier than it would be during times of economic growth, because there’s less competition in the marketplace. It is still perfectly possible to sell your business in a downturn, while getting a fair value for all the hard work you’ve put in to make it grow over the years.

Four Steps on how to sell your business in a downturn

To maximise the return on your investment of all that money and sweat, it’s worth bearing in mind the following steps. Several of them apply to selling your business at any time, but in a downturn they become especially important as corporate finance is limited and asset values are generally depressed:

Present your best face – Ensure that your business is as enticing a prospect as possible for a potential buyer. Of course, you always try to run a tight ship (right?) – but now is the time to take the opportunity to make it even tighter. Take a look over the company’s accounts and make sure everything’s up to date. Tidy up those ledgers, tax returns and bank account records so that any buyer can see what they are buying, and that there are no hidden surprises. Renew your leases, insurances and software licenses (and while you’re at it, why not see whether you can use the fact of the downturn to negotiate a better deal?) The better face you can present to the world, the more valuable your business will appear.
Be flexible – In a downturn, there is no getting around the fact that there are fewer buyers and, unfortunately, there is less cash available. After all, that’s pretty much the definition of a recession. This is the time to be flexible about how the deal is done. You may find that there is someone who is willing to buy your business, but would rather make the purchase by means of a loan, or by offering shares in their business, or giving you assets such as buildings or land in return for your business. This may not be your favoured option, especially if your reason for selling your business in a downturn is to release much-needed cash. However, don’t dismiss the possibility without considering it carefully, because you may find that the assets you’re offered now end up appreciating in value as the economy recovers and business confidence returns to the market.
Have a convincing business plan – Anybody buying a business in a downturn will recognise that they are taking on an element of risk, so you can calm their fears by taking a long, hard look at your own company, and developing a fresh business plan that shows how it can maximise profitability from this point forward. You probably developed a business plan when you first set up your business, so follow the same steps now to analyse your market, your competition, the prospects for future growth and ultimately, the value of your business to a buyer. Don’t forget that they will want to see a good return on their investment, so spend a little time and money on advice from your own lawyers, accountants and bank managers to make sure that your calculations represent a realistic prospect of profit for the buyer.
Finally, consider whether your business actually has some benefits in a downturn. Some businesses actually do better when times are tough, such as those dealing with asset repossessions, or discount retail. If you happen to be operating in these markets (or could expand into them), then now is your time to shine! Make sure that buyers recognise the benefits of buying your business in this downturn – you may actually be a better prospect now than in the boom years.

Whatever your motivation, just remember that if you are selling a genuinely valuable business, an economic downturn need not be a barrier. Be prepared to be patient, as things may be slower than you would like, but if you follow the steps above, you can hang on to get the best deal for your business.

Posted on May 7, 2013April 2, 2016 by Kim Brown — Leave a comment

Video Review: How To Sell A Business In A Bad Economy

How To Sell A Business In A Bad Economy

Although this video was created in America during the Fall of 2011 everything the presenter discusses is valid today. How to sell a business in a bad economy is just as pertinent today as it was then! The presenter, Bill Whitehurst, of Whitehurst Mergers & Acquisitions explains that now, more than ever, the good will value of a business needs to be substantiated to prospective buyers. Mr Whitehurst outlines three managerial tools/resources that can be created to help buyers to better envision good will. Within the video, you’ll learn about the importance of a ‘Procedural Manual’, ‘Training Manual’ and ‘Formalised Sales & Marketing Program’.

If you’re thinking about selling or preparing to sell, this 4 minute video is worth a view.

For more help on how to sell a business, please read the free first chapter of ‘How To Sell A Business: The UK’s #1 guide to maximising your company value and achieving a quick business sale” To get the free chapter, go here: http://sellyourbusiness.biz/how-to-sell-a-business-free-chapter/

Posted on May 6, 2013December 25, 2018 by Joanna Miller — Leave a comment

5 Ways To Increase The Value Of Your Company

Increase The Value Of Your Company

Listed below are 5 ways to increase the value of your company.

Number 1: Make your business more efficient

You don’t need an expert to tell you that if you cut costs and increase productivity you’ll get more sales and you can increase your company value. As with so many things this statement is all well and good in theory but a bit harder in practise. A recent advert used the slogan “Don’t work harder, work smarter” While working hard is good sometimes a bit of extra effort and investment in the short term means fewer late nights and stress in the long term!

Ways you can increase the value of your company by making your business more efficient –

Customer relationship management software – In effect this helps you to gauge who specifically amongst your customers is the one handing over the most of their hard earned and therefore is most worthy of your selling efforts.
Chase up payments – One problem may be that you are not claiming your money fast enough. A way to get the sloth-like non payers going is by introducing late fee charges for unpaid bills and invoices!
Spend less time emailing – Focus more on the tasks you have to achieve. Yes the numbers may look scary but you will often be more productive if you focus on selling then dealing with enquiries. If you are worried about it piling up you may want to consider hiring a virtual PA.
SEO – Make sure that people can find you. Studies show people tend to give up looking after the third page, so you want to make sure you are as close to the top as possible to get that extra traffic (and those potential extra sales!)

For more information this topic, read our article on ‘How to Maximise Business Value‘ here.

Number 2: Shop around suppliers

Cutting costs will help you to increase the value of your company. Shopping around is crucial for everything from buying pens to getting a cheaper deal on travel. While people in the UK are getting better at this there is still a certain degree of reticence about asking for a deal.

Also don’t be afraid to be a bit sneaky and pit suppliers against each other. Tell them what their competitor told you and see if they can match it. Even if they can’t lower prices they may be able to throw in some extras. For example, a travel company may not reduce the cost of a flight but may bump you to first class!

Number 3: 10% staff churn

The rate at which you turnover staff also has an effect on how your company is valued. In an ideal world you would replace the ones who are not pulling their weight with angelic superstars who do everything you tell them and will appear instantly to babysit your children at a second’s notice.

Life unfortunately is not that simple. For a start don’t get fixated purely on the 10% – if one tenth of your employees leaving are the ones that get you the most sales then things are not going well!

You need to handle this carefully by ensuring that anybody coming in is suitably trained and equally that you handle people leaving as delicately as possible. While you want to get those healthy profit figures it can look bad if you are seen as someone who is a hard and unfair taskmaster. Give your leaving staff a positive exit interview can ironically be a good thing, as you can give them feedback and allow them to find a job more suited to their needs (sounds weird but its worth it!)

In short, while you want to get the figures working make sure you keep the human beings behind those figures on side too!

Number 4: Intellectual Property Rights (IPR)

Intellectual property rights (IPR) cover copyrights, trademarks, patents and so forth. These are factors that could help boost your company valuation. The reason that these increase company value is because it is something that you can in effect sell on again a second time.

The best way to illustrate it is with a certain famous branded coffee house. Said famous branded coffee house sells coffee, a drink that is enjoyed throughout the world and has helped Kim (my business partner) get through the day. However, while said famous branded coffee house has made its money by selling coffee, they have also further spread out by franchising across the world, in effect selling themselves as well as the item.

So when you are looking for ways to increase company value don’t be afraid to get someone in to have a look around and see what potential IPR goldmines you could have in your business.

Number 5: Different financial calculations

Finally we go back to how people calculate what a business is worth. This is where it gets tricky. You do not want to be like one of those sweaty Dragon’s Den entrepreneurs trying to bluff an unrealistic set of figures!

There are numerous factors that can affect a value:

Type of cash flow – Ideally with as few costs as possible for higher profit margins.
Reduced risk – What can you do to reduce risk in your business? This will help to increase its value.
Timing – Is there a gap in the market for you? For example whoever thought of designer handbags or shoes with comic book designs on them must be raking in it at the moment!

(More on Business Valuation here).

In conclusion…

What you have are five ways to increase the value of your company. However, they are also worth looking at in terms of making your business more efficient and allowing it to grow more in the long term, something that should not be forgotten!

Posted on May 1, 2013December 25, 2018 by Joanna Miller — Leave a comment

Sell Your Business – Data Room Index

What should a Data Room Index look like?

When considering selling your business, you may hear mention of a Data Room. Since this is something specific to the due diligence process of a business sale or a project bid, your first question may well be “what is a data room”? And following after, you’ll then wonder what a data room index is…

What is a Data Room?

Data is the key to confidence on the part of a potential buyer, being an important factor in the agreed price – and indeed, whether or not a sale goes ahead at all. A data room is often used to help with this aspect of the process.

As a business vendor, you will want to make sure that your potential buyers have access to as much data about your business as they need, in order to make their decision, and to value your business fairly. At the same time, you may well have understandable concerns about the confidentiality of the data. After all, you certainly wouldn’t want commercially sensitive data to be sent around insecurely, with the risk of its being passed on to unauthorised parties.

This is where a data room comes in. The practice of using a data room dates back many years, and has traditionally been a specific room where all of the relevant data is kept for inspection by the bidders. The room is carefully monitored, with the purpose of ensuring that the data is only inspected there, and that it doesn’t leave the room insecurely.

As time has moved on and technology has advanced, the concept of a data room has become increasingly computer-based. If a physical data room is used, it’s likely to contain secure computers owned and controlled by the vendor (or their data room service provider). These computers can be used to view relevant data on-screen, but won’t be linked to the internet and won’t permit copies of files to be made or e-mailed.

In the past few years, though, virtual data rooms have become more popular, as they do away with a lot of the costs and logistical requirements of physical data rooms. A virtual data room is essentially a secure website, carefully controlled with authorised log-ins and data encryption, that allows access to all of the files that would traditionally have been available in the physical data room.

There are several benefits of using a virtual data room, including that authorised users can access it from anywhere with an internet connection, so there’s no longer any need for a dedicated room or physical security. It eliminates the need for bidders and advisors to travel to a particular location, so it reduces costs and allows inspection to be done at a time convenient to the due diligence team. This is especially useful when considering international acquisitions.

Unless your business already operates in the area of secure technology, you will almost certainly want to have a virtual data room set up for you by a specialist provider. They will ensure that only authorised users have access to the data, and that digital rights management restrictions are applied to documents so that they cannot be copied, forwarded or printed without specific permission.

When selecting a provider, ask for assurances that they have dealt with clients in your sector before, and check that they fulfil relevant audit and compliance requirements such as the International Safe Harbor Privacy regulations agreed between the United States and the European Union. You will certainly want them to offer security features such as digital watermarking, 256-bit encryption, two-factor authentication login, and customisable security clearance levels for users.

And what about this Data Room Index (or file structure)?

Your virtual data room provider should be able to advise you on a suitable data room index or file structure for the users to access, but when setting up the files, it’s helpful to consider the whole thing from the bidders’ point of view. You’ll want to ensure that everything they are likely to need is provided in the data room, so if in doubt, ask your own lawyer to get hold of (or create) the kind of checklist that a bidder is likely to use when undertaking due diligence. (You can also purchase our Data Room Pack at our store or visit our freebie’s to see our ‘Data Room Structure Sample’). The exact information to be provided will vary a little from sector to sector, but as an example, you’ll want to include the following in your data room index:

Legal – Certificates of incorporation, memorandum & articles of association, share registers, shareholder transaction listings, minutes of board and shareholder meetings, records of any lawsuits or legal proceedings, etc.

Financial – Statutory accounts, management accounts, asset registers, leases, land and building title deeds, finance policies, authorisation levels, etc.

Regulatory – Licences, certifications, registrations, official inspection records, etc.

Human Resources – Organisation charts, employment policies, salary structures, payroll records, employment contracts, staff turnover reports, etc.

Make sure that the files and folders are set out in a logical, intuitive way, and be sure to include contact details so that bidders can get in touch with your key people to confirm key information.

You will find that you can make life easier for yourself if you prepare for this process in advance. To a large extent, these documents are not unique to the sale process, but constitute the data that any business needs to be well-run, so you can prepare yourself for the data room by keeping good records of all of the above areas of operation. Then, when it comes to the data room process, you and your advisors can work with data room provider to ensure that your bidders have all the data they need – and maximise their chances of making bids that reflect the value of your business.

If you’re considering selling your business, you need all the help you can get, so check out the Sell Your Business Store to get an idea on how we can help you out.

Posted on April 27, 2013December 25, 2018 by Joanna Miller — Leave a comment

What is Due Diligence in Relation to Selling a Business?

What is Due Diligence…

Nobody undertakes the buying or selling of a business lightly, so to find out as much as possible about their potential purchase, a buyer will perform extensive research, known as a due diligence process. This will help them to decide whether or not to go ahead with the purchase, and if so, what level of price they should offer.

There are several reasons why due diligence is undertaken:

The first is simple commercial sense. Committing a large amount of money to acquiring or merging with an unknown company would clearly be far too great a risk, so the more information that can be gathered, the more that risk can be assessed and reduced. Setting a price for a purchase can be a difficult decision to make, based on several factors, so the more information the buyer has, the more confident he or she can be in a proposal.

The second is as “cover” for the decision to be made. The more a purchaser can demonstrate to their managers, financiers and/or shareholders that they went through a due diligence process designed to uncover all aspects of the target company’s operations, the more they can show that the decision was a sound one, especially in cases where there might be commercial difficulties later on.

The third reason is for legal and regulatory compliance. Commercial law in all developed countries requires that shareholders’ funds are protected as far as possible by the process of due diligence, and buyers must follow certain minimum processes to ensure compliance with the legal requirements.

In his book “Due Diligence, a Strategic and Financial Approach”, Luis Gillman sets out nine key aspects of good practice for due diligence when considering buying a business:

Compatibility audit – in which the researcher should explore how well the organisation’s operations are compatible with the buyer’s own company
Financial audit – during which a detailed review will look at all aspects of the target company’s financial position, including looking at published and unpublished accounting information
Macro-environment audit – reviewing the position of the target company in its market, and the prospects for future profits in that sector
Legal/environmental audit – due diligence to ensure that there are no “nasty surprises” regarding potential lawsuits or environmental concerns once a sale is made
Marketing audit – examining the strength of the target’s ability to sell its products and services
Production audit – looking at the quality and quantity of goods and services produced, and how they serve customers
Management audit – reviewing the strengths and weaknesses of the current management structure (bearing in mind that this may well change if a purchase is made)
Information systems audit – to ensure that the company is maximising use of technology, or identifying areas where improvements could be made
Reconciliation audit – bringing all of the above audits together to complete the due diligence process, to make a final decision as to whether the vendor and the purchaser are a “good fit” and whether ultimately, there will be added value to an acquisition.

A buyer will probably only follow all of the above processes in cases of large and complex mergers and acquisitions, and it may be enough for more straightforward business processes that the due diligence process covers only some of them.

Usually, the buyer will rely heavily on the advice of advisors when going through the due diligence process, and this work forms a large part of the expertise of commercial lawyers, accountants, bankers, brokers and other financial advisors.

Due Diligence Performed on You (the Seller)

As a business owner looking to sell your company, you will need to provide as much information as the potential purchaser needs to complete the due diligence process to their own satisfaction. The usual concerns you will have about keeping information confidential do need to be set aside to a certain extent, because a buyer can’t be expected to make a decision based on a partial picture. To protect yourself, it is normal business practice to get your lawyer to draw up a due diligence confidentiality agreement for buyers to sign, preventing them from copying or sharing the information you provide – and crucially, to prevent them from taking action upon it should they decide not to go ahead with the purchase.

It’s a good idea to ask your lawyer or accountant to give you an idea of exactly which documents the buyer is likely to want to see, before the due diligence process begins, so that you’re prepared with all the information. This should help to speed up the process and prevent delays caused by requests for missing information during due diligence. (Check out our Store to find resources that can help you with Due Diligence)

Due Diligence You Perform on the Buyer

Similarly, you will want to perform some due diligence yourself as a vendor. Due diligence is, to some extent, a two-way street, and although you wouldn’t need to go through as much detail as the buyer, you should ask your advisors for help to ensure that the buyer at least has the means to pay the asking price. If the purchase involved the offer of their own shares as well as cash, then of course you would need to do more work to ensure that they were really worth the amount that the buyer claimed.

Posted on April 25, 2013December 25, 2018 by Joanna Miller — Leave a comment

What is the top reason for selling a business?

Selling a business – here’s the top reason people are doing it

While surfing the Internet, I found the following information. The news comes from America however the UK often has similar trends.

“As noted in a recent article in The Colorado Springs Business Journal, the Market Pulse Quarterly Survey Report from the fourth quarter of 2012 indicated that the retirement of baby boomers was noted as the top reason for selling a business for the first time in history. Moreover, the mass exodus of baby boomers from the workforce is expected to cause a 35-percent increase in sales of businesses by the end of 2013. In fact, many of these folks might already have sold had it not been for the recession of the late 2000’s.”

Posted on April 24, 2013August 12, 2013 by Kim Brown — Leave a comment

Living in the business exit void

The Business Exit Void

Whenever I was asked, ‘what will you do after you sell your business,’ I always responded that I’d start a new business but do it better, quicker and easier. I knew that once I completed my business exit I’d take a 10 day holiday and then start building a new empire.

Goes to show you how much I know myself (or don’t know). After my business exit I dabbled in a bit of this and a bit of that. I went to meetings, considered consultancy, attended a monthly business club, wrote a book on the nature of reality, became a Day Skipper (yachting), started being an at-home parent, set up a website and another and another and soon settled into a void. Nothing seemed to excite me. I would create a business plan or empire and then the following day think, ‘no…I don’t really want to do that.’ My plans to start on a new adventure didn’t seem to materialise.

Luckily I had enough money to coast for a while so finding work wasn’t a short-term necessity. But after several months I wondered if I was lazy – perhaps I didn’t like to work. Perhaps the only reason I did create a successful company was because I was in it for the money. And if that’s the case am I going to have to bumble along until my money runs out and I have nothing to show for all my hard work. (Can you see a crisis coming on?)

I’m sure there are many business owners that exit and know exactly what they’re going to do but this ex-business owner became a lost sheep. I had defined myself so much by my previous job that I didn’t really know who I was, what I wanted or even what I really enjoyed doing. By the time of my exit I was disillusioned with the business world. Part of me wanted to buy a house on Fiji and become a Yoga guru and another part of me wanted to get my mojo back and start something fun and interesting. I didn’t know what I wanted nor did I fully understand my options. I didn’t know what I didn’t know!

Rewind a year previous and I felt stuck, trapped, undervalued, and overworked. Yes – it was my company and yet I felt stifled by it. I wanted to be free! And then after almost a year of negotiations, uncertainty, doubts and sleepless nights my wish for freedom came true. Free at last. Now what?

The reasons to exit and the business exit process can be so consuming that life after the business doesn’t get attention. And perhaps that’s okay. Since my departure I’ve done a lot of soul searching and can honestly say that I now know what it means to follow my heart rather than my head. Rather than doing what I was good at, I took a back seat and let my boat drift around while taking stock on what I liked, didn’t like and where I wanted to go.

It’s taken over a year for me to get my mojo back but this mojo is different. Rather than jump into doing what I’ve always done, I’ve taken my time and changed my entire lifestyle. I’ve gone from being a control freak stressed business owner workaholic to a calm, centred enthusiastic entrepreneur with a portfolio of fun and interesting projects. I’ve learned how to create a life I want to live rather than work endlessly to enjoy a life later.

So whether you are just starting out on your business exit journey or are nearing the end I thought I’d share my living in the void story with you. At least if it happens, you’ll have the comfort that it’s not just you.