The advertising and promotion of your business is so important, why? Because it costs money to do it right, and a whole lot more if it’s done wrong. The business needs to be presented in the right light to connect with the target market segments most likely to purchase your business. Not only does it need to be price positioned in the market correctly to begin with, but also it needs to be ‘value positioned’. That is, what are the unique things about your business that gives it ‘special value’ to the buyers. Once this is established, this then needs to be communicated successfully across all marketing, including within ‘personal selling presentations’ carried out by brokers to prospective buyers. Once a buyer is motivated enough to inspect a business, this must be carried out with the utmost of professionalism and should ideally include a briefing to the seller from the broker on what a ‘particular buyer’ is looking for in the business, and what their history and skill set is.
Buyers are encouraged by hearing questions answered directly from the seller during an inspection, particularly when it is in line with what their understanding of the facts are after reading the Information Memorandum on the business. However, anything contrary to this can raise questions of inconsistency. Buyers want to hear what you ‘actually do’ in the business, how you carry out your ‘particular tasks’, and how much time you spend doing it. The easier the business is to run and operate the better, the less time you spend working in the business the better, all of which depend on what systems, procedures, and capable staff are in place and what management reporting systems have been set up, so you need to talk about these things.
To help with the negotiation process, your broker will recommend an interested buyer puts an offer in writing to buy your business, in the form of a sales contract. Most brokers will put this contract together on behalf of their client, the seller. This will not only outline the price which they may be offering, but also the time frames for due diligence and finance, of which most contracts are subject to and conditional upon for 14-21 days. Such an offer will outline a settlement date, a training period after settlement, lease acceptance time frame and any other special conditions a buyer may deem important, such as a restraint of trade on the current owner for a period after settlement, etc. A contract from signing to settlement can go anywhere from 30 days to 90 days typically.
Some of the pitfalls a seller should look out for include making sure a lease disclosure statement is completed correctly, if applicable, and that they have all the documents which pertain to the lease including any amendments. The seller should also make sure they are aware of any employee entitlements which may have to be paid out, or allowed for at settlement, along with any equipment leases that must be dealt with at that time. They also need to make sure all the financial information is properly prepared by their accountant for due diligence.
For more details on any of the above, and an action plan for selling your business, call me or one of my team for a business assessment today.