Selling your business – what to do for an easy sale

Selling your business could be one of the most important and difficult decisions you will make in your business career. When things are going well – your business is making money, you’re enjoying yourself, and the future looks great -  you’re not thinking about preparing for your retirement. 

The earlier you start planning for your company’s sale, the better you’ll be able to take advantage of a higher valuation and a quick turnaround. Here are some good reasons why you should be prepared to sell:  

·         You may fall sick unexpectedly

·         Your life goals change along the way

·         Not having a successor to replace you as you retire

·         Business partnership issues and you want to sell your shares

       ·     Lifestyle change


When you are ready to sell your successful company, you should keep these three things in mind:

·         You must make a profit from your investment in the company

·         The sale of your equity should be converted into liquid assets such as cash

·         The amount you receive should meet your needs for your professional and personal life

What is the value of your business?

Determining the value of your business is like sales – what are your potential buyers willing to pay for a business like yours? With the help of a Chartered Accountant, you can run various accounting models to come up with a number using data that comes from the economic strength of your business, your industry, how much your competitors are worth, your sales revenue and profit margins.  All these must be taken into account. Remember, the buyer is not looking at purchasing the cheapest business they can find, they are looking for a company that can potentially make them more money in the future. So you need to prove to the buyers that your business will continue to grow in the industry you’re in.  

Work with a third-party business valuator whose objectivity can help smooth the sale for both yourself and your buyer.

Are your finances in shape?

You should already have your books kept in order while you’re running your business. When it comes to a sale, nothing is more important to a buyer than your accounting.  They will be asking questions such as:

·         Are you making money?

·         Are your profit margins healthy?

·         Does the company have any unmanageable debt?

New owners want to buy businesses that are healthy and thriving.  You'll also want to be sure that you've reduced your liabilities as much as possible, doing things such as settling any lawsuits and making sure all tax payments are up to date.

Gather a professional team

Selling a business is complicated.  With a complex transaction like this, you want to make sure that all your bases are covered.  By hiring a professional team to guide you in the sales process, they can provide you with the objective advice that you need to sell your business at the best value.  In recruiting a team, make sure that you choose consultants who have experience in your industry and your type of business, be it a small business or a large multi-national corporation.

Other than a corporate lawyer who can help you with the legalese and contracts, you should also take a look at hiring a good accountant. If your business has assets such as a manufacturing plant and warehouses, you can also recruit a corporate realtor who may have contacts in your industry.

Make sure that you take the time and effort to do it right the first time. By preparing carefully and using the best resources that you can hire, you are increasing the chances of selling your business at a great price.

How to Valuate Your Business

There comes a time for many businesses when it may be necessary to find investors or a buyer. In either case, it will be imperative to assess the value of your business. Long before you approach a potential investor or buyer, you need to know exactly where the negotiations will begin.

Valuating a business is by no means an exact science. There are several common methods that can be employed. Each method uses different assumptions and, logically, each method will result in a different value. Obviously, part of the negotiation will involve agreeing upon the method employed to determine the business' worth.

Many investors prefer the Discounted Cash Flow method to determine the value of the business. It is based on future cash flows. By employing this method, the investor can see a projection of the actual cash that will come to the company and thus determine the investor's return on investment. A similar method is determining the Going Concern Value. This method compares the current investment to future cash inflows. The revenues of previous years are used to project future revenues, on the assumption that the revenues will not change drastically.

Another common method to determine the value of a company is based on assets. A determination of the book value of the company is quite straightforward. The company's net worth, or shareholders' equity, is determined based on the financial statements of the company. Quite simply, subtract liabilities from gross assets and the result is the net worth or book value.

A similar method is determining the liquidation value of the company, based on the company's assets. This method calculates the income from the sale of all the company's assets. The assumption is that equipment and land would be sold at a price close to their market value. Inventory and receivables generally yield a reduced value. A liquidation value is generally employed for the sale of a business, rather than investment purposes.

Whichever method you use, it is best to consult with a professional advisor who can help avoid mistakes that could prove costly.

Incorporate in Canada with CorporationCentre.ca
Click. You're incorporated ®

Customers at the Centre

An all too common mistake of many businesses is losing sight of what is truly important. It is relatively easy to get caught up in strategic planning, marketing techniques, employee relations, technological upgrading, and a milieu of other items that are important to the successful operation of a business. But, when the dust settles, we tend to forget the most important element of our business – the customer.

The customer is the core of our business. Without customers, business is just…a business. It won't sell but it will be there, though not for long. In today's market, customers are bombarded with information and have more choices available than ever. Gone are the days of Pop's General Store. Pop sold everything and when he didn't, you made do without. Today, it's a buyer's market. Customers can shop for virtually everything they want. Internet shopping makes the world their marketplace. In order for a business to attract buyers, they must be able to reach out to that customer in a way that will get the business noticed.

Find out what the customer really needs or wants, not what you think. What issues are affecting the customer that will cause them to need your product or service? Why should the customer identify with you?

Sometimes, the customer is unsure of what they need. They may know that they are in a certain situation and "something" could help them, if they only knew what it was. This is a chance for your business to fill that void. Customize your service or product to help the customer.

Think outside the box. Inside the box is your business. The customer is outside. Find out what your business must do to break through the constraints. Remember that you need the customer more than they need you. However, when you can create the link that makes their needs your needs, you'll put your business on the winning track.

Incorporate in Canada with CorporationCentre.ca
Click. You're incorporated ®