4a.Gaining an understanding of the process of selling your business: PART ONE

A business owner needs to gain an understanding of the process of selling a business, from beginning to end. This begins with finding a reliable and trustworthy broker who specialises in selling businesses. -The things you need to know when appointing a broker, the likely time frames for selling, the recommended asking price and why, the advertising campaign, what’s involved with an inspection of the business by sellers, and what your involvement will be and why. The contract of sale, the process and time frames, and who does what and why. And finally, what are the pitfalls to look out for.

The best way to find a reliable broker or brokerage is to look for those that have a number of years’ experience in the industry, with a history of ‘actually selling’ businesses in your area. These brokerages are also more likely to also have a database of buyers looking for a business in your area. They should also be a member of an industry body such as the Australian Institute of Business Brokers, or the Real Estate Institute in your state, as their membership is bound by a code of conduct. An individual business broker should also have had gained suitable qualifications in the industry, such as being a certified practicing business broker or registered business valuer and have had several years owning and operating their own business.  In other words they can ‘walk the talk’. In your conversation with a potential broker try to establish if they are sincerely interested in taking on your business to sell, and not just paying you lip service, or listing your business for the sake of listing it. If your business is a smaller type business, say with an asking price of under 200k, seek reassurance from the brokerage that they will actively push your business onto potential buyers in the same way they would put an effort into selling the larger businesses.

Next find out the likely time frames for selling a business like yours, what the local market conditions are like, and where the likely buyers will come from for your business. If they cannot answer these questions, then they are not likely to be able to help you as effectively as those that can answer confidently. The next step after a broker has given you their appraisal on what they believe the likely selling range is for your business, is to ask How they come up with that price? What were the risks that you established as being important?  Is your assessment of my business based on any recent sales evidence? You need to be comfortable in the ask price a broker wants to put on your business, that its realistic, and that you are not receiving an unrealistic price quote that’s just been given so you will list the business with them. On the other hand, a good broker will want to get as much as possible for the business, and not under quote it either, so a good question to ask is, what special features or value can you see in my business, so that we could ask more for it than others on the market?