Selling your business made simple: David Ferraz

Business agent, David Ferraz, has some advice on when to know if the time is right to sell your business.

As a business broker, it is amazing how often I hear comments like ’Business is going really well, but if things change I might need to think about selling.'

Some business owners, after experiencing a few tough months of trading, will phone up and ask me to list their business for sale. If a few of their customers suddenly pay their bills and some big orders come through, my phone rings again. This time the vendor says ‘Things are going really well at the moment, I now want to keep my business.'

There is a fundamental problem with this approach to deciding when to sell. By far the biggest driver of business value is profitability. If you sell when your business is struggling, the price you get is likely to be a lot lower than if you sell when profit is high.

For most business owners, their business is a major asset, if not the largest asset that they own. For this reason it is important to try and maximise the selling price of the business. Achieving this requires taking control and planning for the sale. This planning process should ideally start a few years before the business is put on the market.

Planning for a business sale needs to cover many matters including:

1. Reducing the reliance of the business on the owner
2. Having a marketing plan in place to ensure that the business will have a history of stable or increasing sales by the time it gets to market
3. Strict cost control to ensure that profitability is maximised
4. Paying down liabilities
5. Cleaning up the financial statements
6. Tax planning
7. Ensuring that systems and procedures are in place and being used
8. Making sure that there are no ‘skeletons in the closet’ that could scuttle a sale
9. Ensuring that the premises and any equipment are clean, tidy and well presented

It is a good idea to consult with your accountant, business broker and solicitor as early in the process as possible. They have more than likely been through this process many times and will be able to guide you through it and tailor the details to your particular circumstances.

And now to answer that big question – when is the best time to sell your business? It is at the time that you planned to sell it.

David Ferraz is a licensed business agent at Cornerstone Business Brokers. He specialises in the sale of printing businesses and can be contacted on 0425 329 765.