Whilst we await statistics from the UK on the state of the business sales market we can take a look over the pond for some indicators.
According to the BizBuySell Insight Report, published by the online business marketplace BizBuySell, the number of small business deals that completed in 2013 increased by 41.7 percent in third quarter compared to the same quarter in 2012. Interestingly, restaurants & retail businesses saw the most action. The median sale price compared with the same time the previous year was also up by 2.9%. For those wondering whether the time is right to sell, these indicators are positive as we often find where the US leads, UK stats follow.
We also read that 68 percent of merger and acquisition insiders expect the market to pick up strength in the 12 months following September 2013, according to a survey released in October by law firm Dykema. If this is the case, this is a good time for those of you thinking of retiring or taking a new path to consider how to put your business on the market.
Market timing is always tricky, so it is difficult to say when the right time to sell is therefore you must really consider ‘if and when’ you are ready to sell. Get your business in order so that if the opportunity comes, and we know there are purchasers out there, you are ready to move forward quickly and effectively.
What to Consider When You Put Your Business On The Market
In order to get the best price having decided to put your business on the market, consider taking these basic steps to make the sale process move smoothly.
1. Are your books in order?
Many SME owners find looking after the books the ‘not so interesting’ part of running their business, things can often be left to the last minute, just before the tax man comes calling or at the year end when the accountant asks for the paperwork! Although potential purchasers do not necessarily want to see full and final sets of accounts immediately, they do want to see an accurately kept, up to date account of the health and state of the business. In fact, many investment firms/individuals are put off straight away if the books are in disarray.
We usually advise our clients to have prepared accounts for the past 3 years, and where appropriate the year to date. We often find that when a purchaser visits the business, they like to see the accounts in detail with supporting invoices etc, this sort of paperwork can not be thrown together at the last minute! In one negotiation, our purchaser walked away as anomalies came out of the woodwork when the books were tidied up!
Another point to think about, even when not considering selling, is we often find our clients put their business on the market unexpectedly due to health problems or ‘home’ troubles, in this case if the books & paperwork are in order, it is one less worry.
2. Protect your intellectual property
Make sure you have your trademarks and patents registered and up to date. These may add significant value to your business. This also reduces the risk of your ideas being ‘borrowed’ by unscrupulous purchasers.
Some confusion lies with websites, domain names and servers too. Make sure if you are reliant on the internet for sales and introductions, you are quite clear who owns your domain names, the copyright to your website content and email addresses.
The very nature of the SME is that the personality, commitment and enthusiasm of the owner has created the successful business. Jock Purtle, of Digital Exits based in Sydney, tells us “Generally, if your business relies less on the owner, you get a higher selling price”, he continues to explain that ensuring operations are managed by staff or systems / technology, then there’s less day-to-day importance of the owner and you are going to get a higher price.
So consider, if you step away from the business… is there still a business? If the answer is no, then you need to start looking at how your role can be taken by others within the company whilst maintaining its core value – the value you are hoping to sell.
4. What to do next?
How do you get your business out onto the market, who should you advertise it with and what does it cost? All important questions and here at a2z Business Brokers, we offer an independent, personal approach to help you put your business on the market. Anthony Redpath, the managing director, has a wealth of experience in business brokering and is happy to share this expertise when you decide it is the right time to sell your business. Having run your own business for many years, you may wish to be in control of its sale too, we can discuss how to sell your business in a way that suits you.
So, if it is the right time for you to put your business on the market, get in touch via our contact page, or call 0844 247 0 247.