Yes. However selling your business is a very complex undertaking for a non-qualified individual. It can be a very long and arduous exercise and often businesses which have not been professionally appraised sit on the market for years.
By engaging a professional ‘Certified Business Valuer’ and ‘Certified Practising Business Broker’ you will have access to someone who has spent years studying to become a powerhouse of information with regards to determining real market value and all other aspects of preparing a business for sale.
There are seven crucial areas which need to factored in to determine the saleability and market value of your business
1. Price & Value
2. Profitability & Risk
3. Financial Information
4. Premises & Lease
5. Team, Suppliers & customers
6. Systems & manuals
7. Stock Plant & Equipment
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The current market value is the single most important factor when it comes to selling most businesses and is determined by profitability and risk. This must be calculated scientifically by an experienced person who understands the business valuation / detailed appraisal process of small business. (SME) Preferably a Certified Business Valuer. Value is Calculated, price is negotiated. If the listed price is not seen as value for money and meets the current market value, prospective buyers will not even make an enquiry. This value must be able to be substantiated by facts and figures, proving that the value determined is accurate and valid.(SME-small to medium enterprises)
Most buyers search for business opportunities that are profitable now and show a reasonable Return On Investment (ROI) going into the future. That is what they are buying! Risk is a major factor and buyers investigate and determine the risk in maintaining that ongoing profitability. In most cases it is the financier /advisors of the business purchase the buyer relies on to ultimately make the decision and it is them you must satisfy. ( Business Valuer, Accountant, Finance Broker, Bank Manager, Solicitor, etc or combination of all)
In order for anyone to value, appraise or prove that the value that has been placed on the business is true it is absolutely critical that all the financial information is correct. It must be easy to understand, normalised and adjusted to reflect the true value taking into consideration all ad backs and expenses not always dealt with by an Accountant or Bookkeeper. Any changes made to the financials must be explained in detail making it easy for anyone to understand what and why changes were made. Prospective buyers will want to verify financial information provided with cross checks from Business Activity Statements,(BAS) Tax Returns and Bank Accounts.
The location, rent, suitability for future growth and lease arrangements are very important as the current income was generated from these premises and location. Are there any substantial changes to the premises, renovation, new shop front or fitout required as per lease? Any major construction, road closers etc in or near the premises that could affect the income of the business that you are aware of? Most small businesses are very dependent on location and premises. In most cases it is essential that the rent is reasonable, meets local market value and a lease is in place for at least 5 years with favourable conditions for lessee. Premise must be clean, tidy and very presentable to a prospective buyer.
A significant asset of a lot of small businesses are the staff and client list. They account for a good portion of the ‘Goodwill Value’. The staff know the business, the daily operation, most of the clients and suppliers. They have formed a relationship with them and staff may have technical skills that are hard to replace. Buyers do not want to purchase businesses that are totally dependent on the owners. Great staff are important in maintaining ongoing profitability and therefore reduce the risk of future losses. A list of all staff and their duties should be provided as well as a client list. Any contracts in place with clients or suppliers?
The procedures used to successfully operate any business must be documented so anyone with a bit of training can run the business without the current owners. Again reducing risk to the new owner. They must explain in detail all aspects of operation, production processes, control mechanisms, buying, selling, staff, clients, suppliers, basically “how to do everything” without the current owner. If you can read you can run the business.
All stock must be recorded and its value calculated at cost price. Any out dated, unsaleable or unusable stock should be taken out. Plant and Equipment must be in reasonable condition, function able, well maintained, and contribute to the value of the business. Stock, Plant and Equipment must be valued realistically or it could cost you the sale of your business. Trust is essential in the sale process.