Selling a business is not something that is done every day. The vast majority of printing business proprietors has never sold a business before. So it’s important to choose advisors carefully, especially in today’s tough environment. Ascent Partners’ principal, Richard Rasmussen, looks at how to do it right.
The choice of which advisors you include in your transition / business sales team is obviously a vital component in a smooth and successful business sale. In all likelihood you’ll only have one shot at it, so you need to choose wisely.
As with all professional services (including printing), the cheapest option is not always the best – you need to choose “horses for courses” advisors. The upfront cost is largely irrelevant, it’s the final “in the pocket” and personal outcomes that should be the primary prerequisites.
Below is a list of advisors you may wish to consider:
Accountants - The first person you should consider to be on the team is your accountant. However, care needs to be taken to choose which areas they are included in. Taxation planning is usually a “no brainer”, as is the preparation of financial documents to be included in the sales process, and assistance with responses to financial due diligence questions.
Business appraisals and valuations are probably not their forte, especially if they work for a variety of clients and have no specialist knowledge of the printing industry. I can’t tell you the number of times my clients have been given completely over the top valuation and appraisals of their business. As an example one gave an appraised value of $3,000,000, I appraised it at $1,200,000. It sold for a lot closer to my number. The reason they can be so out largely lies with them having no knowledge of the market value of plant and equipment, and having no prior sale knowledge as to what multiple to apply (a multiple is the number often applied to the profit of a business to establish a selling price).
Financial Advisors – They can assist in the preparation of your personal financial objectives, and implementation advice before and after the sale. It’s not all about the business sale; it’s also about your own financial situation and what money you need to move onto the next stage of your life.
Business Consultants – They can help in the planning and strategy in the transition phase. Business consultants with industry knowledge will obviously have a head start on others, as they know the different business models, business requirements and what buyers are looking for. For example if exit planning is done well in advance they should be able to advise you on what you need to do in the lead up to sale. This may include changing business models, retiring obsolete equipment, not hiring replacement staff, and more emphasis on retaining customers. It’s obviously hard to provide that advice if they don’t have industry knowledge.
Lawyers – Need to be appointed to prepare sales contracts and letters of agreement. They also offer advice in the process to ensure your best interests are protected and served.
Business Appraisers / Valuers – As discussed throughout previous Six Tips, we believe the first step in the transition process is to have your business professionally appraised. This provides the starting point from which to plan your transition. The appraisal needs to be from a professional with industry experience. An incorrect appraisal (either higher or lower) can obviously impact heavily on the final business sale final price you achieve. It’s important to get it right.
Equipment Valuers –As the plant and equipment value and the goodwill value make the sum total of the business value, it is important to establish a realistic market value for the plant and equipment prior to marketing the business. This can be done by independent equipment valuers as an aid to building up a justification of asking price for the business. Industry specific brokers and equipment dealers can also offer indicative values, but it is usually the equipment valuers that carry the most weight with the banks.
Friends, family, colleagues and peers – Obviously you may have friends, family, colleagues and peers that you can assist and provide advice in the transition phase. It’s very important however, when seeking their advice, that you consider their credentials and their ability to realistically add value to the process. However well intentioned and well meaning they are, you should be seeking advice from those with industry and relevant business sales experience.
Business Sales Agents:
There are a few common options:
a. Self Sell – You may choose to sell the business yourself, which has the advantage of eliminating business sales fees, but has the disadvantage of reducing the ability to keep the sale private. Other factors to consider are how well equipped you are to sell the business, prepare sales documents (which you provide the prospects), get confidentiality agreements prepared, keep the emotion out of selling the business and whether you have the time to deal with the sales prospect’s enquiries. A poorly prepared sales document and an over the top asking price is likely to turn off vendors who more often than not would prefer to deal with a third party.
b. Business sales agents can be a good option as they have experience in business sales. Biased as we may be, we think the best agents are ones that have printing industry business sales experience, have the runs on the board, have good networks and prospects on the books, and have access to relevant advertising media.
c. Large accountancy firms – offer the same as business sales agent, perhaps with extended services such as tax advice, accountancy, and business advice. Mostly they will want the larger the businesses.
There are of course other advisors that may be included in your business transition and business sale team. Some may include staff members. You need to realistically consider where you need help and assistance, understanding that any advisor bought into the team should be able to show you and justify to you where they can add value to the process. It’s best to ask around and ask for references from your advisors.
Your aim should be to maximise business value and to meet your personal objectives during and post the transition phase. The choice of the right “horses for courses” team is therefore a vital component to achieving these goals.
At Ascent Partners, as an Australian printing industry specialist, we offer the following transition and business sales services:
- Business appraisals
- Business planning and transition advice
- Act as your business sales agent (around 30 print related business sold).
Richard Rasmussen can be contacted at Ascent Partners (1300 887 648 or mobile 0402 021 101). For further information or visit www.ascentpartners.com.au