Author Topic: Remember When Preparing Your Business For Sale  (Read 12 times)

felicia

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Remember When Preparing Your Business For Sale
« on: November 19, 2020, 09:59:26 AM »
Legal Issues

Any buyer worth their salt will conduct some form of due diligence if they are serious about purchasing your business which is why it

is very important to settle any legal disputes or issues that may affect the sale of your business.

Many deals have collapsed due to legal issues or disputes that the vendor has failed to sort out or disclose. If you are able to solve

these issues prior to negotiations and due diligence you have paved the way for a successful sale. Issues such as lease agreements on

property and equipment, outstanding payments or settlements and other potential liabilities should be tackled prior to the negotiation

period as these issues are notorious for collapsing deals.

It's also a good idea to turn any verbal agreements you have with key suppliers and customers into written contracts. Prospective

buyers want to feel confident that all the key aspects of the business are tied down and enforceable by law.

Housekeeping

It is important to pay attention to your premises and ensure that all equipment and stock is up to date, that your office looks neat

and professional and all unsold or out of date inventory is moved on. First impressions of your business count so it's important you

make a good one.

You should also use this period to begin looking at your company accounts. Many small businesses are set up to minimize tax but this

method of accounting leads to lower valuations as many offers are made by applying a multiple to yearly profits. If you are able to

adjust your accounting methods or at least build in a framework that shows the business' true profitability this will eliminate much

of the time wasted haggling over the business' value.

It is a good idea to look at the situation with your debtors and reduce the amount of bad debt on your books. Buyers are weary of

purchasing businesses where it seems the level of bad debt is too high or businesses where the customers take too long to settle

accounts. You should use the preparation period to reduce the amount of bad debt and possibly restructure how certain accounts are

paid.

If you are determined to receive the best possible price for your business it is important that you take the time and effort to

prepare your business for sale otherwise you risk leaving money on the table. A poorly prepared business is rarely sold so it is

important not to cut corners during this period.


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