Selling a family business is still one of the most important decisions that you will ever have to make because it is a final decision, not like other decisions you have had to make running the business.
It is my firm belief that in order to sell any business there are a few essential things that have to be considered:
- An in depth analysis of the business to determine the value and if the business is actually saleable
- What will motivate a buyer to buy the business
- What is the expected level of future profitability
- If a business fails to generate a commercial salary for the owner, then it cannot have any goodwill
- Assess and analyse your business from a buyers point of view
- Businesses mostly won’t sell or generate genuine interest unless it represents fair value in the market place
- The market is willing to pay for “goodwill” , but they will only pay when they confidence in the information that suggests there is goodwill
- Value must relate to market value, not just some theory
- The closer the asking price to the market value, the quicker the business will sell
- The presentation of clear financials is paramount
- Any adjustments to financials must be clearly defined why adjusted
- R O I ( return on investment) is determined by the level of risk
- The buyer is not buying you, they are buying your customers and your system’s
- Value is built around the concepts of risk and return
- An understanding of the future profit of a business is essential for an accurate appraisal or valuation
- Cash flow and risk are 2 of the most important factors in appraising a business
- To get maximum price you need to approach selling with the determination that you devoted to building your business value
- Getting maximum sale price ultimately depends on whether your business can assure buyers that its value and success is sustainable and verifiable
- It is only by the application of sound business principles that a reliable and defensible valuation can be obtained ( W Lonergan)
- Capitalisation of Future Maintainable Earning’s (F M E) most common method of determining most small business value