Whether you’re still considering whether or not to sell your small business or the decision is set in stone, there are several steps to complete along the way before the final signature is written. A family-owned business may be passed on to a succeeding family member, while a larger business may be sold to an interested party in the industry. Regardless of the individual circumstances, any time a business owner is preparing to sell, there are several tasks to accomplish that help to achieve a smooth transition.
Preparing to Sell
Before negotiations can begin or a fair price can be set, the business needs to address its finances. Getting financial details organised and up to date will make a big difference in helping you and potential buyers get an accurate picture of potential profits.
Compile Finances
Potential buyers will want to peruse financial statements prepared by your company’s accountant(s) or accounting firm to know whether they’re purchasing a sound, profitable business. If your asking price doesn’t fairly reflect what your company’s profits and financial state is, it may be difficult to find potential buyers. To ensure your business’ resources are in good standing, consider doing the following:
- Selling assets your business no longer uses
- Cease investing in long-term projects that require consistent funding
- Utilise a business advisor to devise a realistic financial outlook for the business.
Address Staffing Issues
Resolving staff problems before putting a business up for sale can go a long way towards developing the buyer’s confidence in your business’ operation. If buyers detect difficult employee relationships, they may be put off and decide not to enter negotiations.
Create a Business Plan
If you don’t already have one, create a comprehensive business plan that essentially lays out how your business is run efficiently, that it has good leadership and management and your plans for growth if you hadn’t decided to sell. Potential buyers will likely ask for this information so they can get an idea of where you see the business heading.
Utilise a Business Broker
A business broker can help you find and negotiate with potential buyers so you can focus on the pressing needs of your business as you prepare to sell. Selling is not only time-consuming, but it also requires the knowledgeable expertise of a specialist. Business brokers:
- Have an excellent idea of the current market in your business’ industry and can gauge the likelihood of your business being able to sell based on existing competition
- Can put together a comprehensive marketing campaign for attracting potential buyers
- Ensure you profit as much as possible from the sale of your business.
Decide Your Future Role
Some business owners choose to remain involved in their company’s operation after it has sold and some choose to cut all ties completely. If you do choose to remain involved, there are a few ways you can do this:
- Retaining shares, which ensures that you still earn an income whether you’ve entered retirement or have started another business venture
- Retaining a role in operation. Some business owners step back from management but remain in an advisory role or as a consultant.
Selling Your Business
Once sufficient preparations are made by you and your hired business broker, the selling process can begin with negotiations. A business broker will help you set a fair selling price that’s based on several factors including; current competition, perceived and current market value and the financial state of your company. They’ll also help you sort out the tax implications. Although New Zealand has no capital gains tax, there are other tax-related factors to consider, including taxes you may owe for selling shares or assets. In these cases it’s a good idea to consult with an accountant.
When a business owner completes these steps, it can help make the transition a smooth one so that the company can continue experiencing ongoing success after the torch has been passed.
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