Jamiesons - Business Brokers - Business Sales - Jamieson Business Valuations

Keep it quiet when selling a business!

Once an owner decides to sell a business it's not always a good idea to tell the world immediately.
There are many issues that require careful consideration so that the value of the business remains unaffected while the sale process is carried out.
A business known to be for sale raises suspicions among several important groups of people. Employees wonder about job security and may look for new positions.
Suppliers become concerned about getting paid for their latest invoices and can tighten credit terms. Competitors reach for their phones to contact every customer of the business they know of to offer an 'unbeatable deal' to change supplier.
Nothing spreads quicker than the news that a business is for sale, and it can become a real problem for the vendor as well as for the agent handling the sale transaction. It can certainly make it difficult for the buyers and advisors to establish the fair market value of the business.

Extreme care
All parties involved should take extreme care to keep the fact of the business being sold a secret.

Information disclosed by the owner must be treated as highly confidential and will not be released unless the owner's permission has been received and the advisor feels it can be made known without compromising aspects of the sale.
Professional advisors are rarely the source of leaks about a business coming onto the market.

It's too important for their professional standing to put at risk their ability to keep things under wraps until the appropriate time.

The problem can usually be found in the buyer's or seller's ranks.
One important safeguard is that the name of the business should not be mentioned in the context of marketing it.
Instead, an accurate summary of the key points about the business is used to capture the attention of prospective purchasers without giving away enough to allow the identification of the seller.

Confidentiality agreement
Prospective buyers can be asked to sign a confidentiality agreement (also called a non-disclosure agreement) before any further details are revealed.
The list of prospective buyers will be carefully checked so that direct competitors can be identified and won't benefit from some critical market knowledge.
The underlying aim of all this secrecy is to retain the value of the business as a going concern, and that includes the stability of its employees and the company's position in the market.

6 ways to ensure your business fetches full value

There are many errors committed by businesses that can reduce their appeal to prospective purchasers. These are the 6 most common.

1.Understand cashflow management
No matter how much money you're making 'on paper' you need real cash to pay the bills. Income and expenditure cash flows rarely coincide, with inflows often lagging behind.
Many regular cash outflows such as salaries, loan repayments and taxes, must be made on fixed dates.
The business must always be in a position to meet these payments so that it avoids angry creditors or a disgruntled workforce.

About Jamieson
Corporate Services

For over 20 years Jamieson Corporate Services has provided business valuation and broking services to owners and managers of private businesses.
Our principals are licensed as business agents by the NSW office of Fair Trading.
The firm is a member of the Australian Institute of Business Brokers and the Real Estate Institute of NSW.
Further information is available from our website: www.jamiesons.com.au

2. Keep records up to date
Every business needs to keep relevant and accurate records. These can include equipment maintenance histories, personnel information, and information related to your income and costs of business.
Without these records a purchaser has no way of really knowing how the business is performing or what areas need attention.
3. Minimise inventories
Inventory is an expense, and having too much stock on hand can make a business hard to sell.
Keep inventory levels high enough to meet anticipated demand, but keeping extra on hand 'just in case' can lead to excessive stock no purchaser wants to buy.
4. Collect outstanding debts
Nobody likes to hassle customers but unless you have a systematic plan for collecting outstanding amounts and make sure it's carried out you'll wind up with debts that have become too old to collect.
A prospective purchaser will always look at the businesses' customers and their payment histories. Have a credit policy and enforce it.

5. Delegate work
The less you're doing to personally run the business the easier it is to sell it. Turn as much of the work as possible over to your employees and give them the abilities to do the job.
You also want to eliminate any perceptions that the businesses' relationships with clients or customers are personal in nature.
An incoming business owner will need time to work ON their business. If they have to spend too much time working IN it there's not going to be enough time to develop the business and make it grow.
6. Keep costs under control
Costs have to be controlled regardless of how much money the business is bringing in. Purchasers want to buy a business that has already achieved a consistent level of profitability enabling it to stay in business.
A business that has consistently low profits relative to its competition is headed for a 'fire sale' and won't bring a premium price, regardless of its turnover.

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