When is the right time for a selling a business? The answer is simple: when it is worth the most money. However, the issue here is that, unless you plan carefully, you cannot expect a buyer to turn up at exactly the right time when the business has reached its peak value.
Only 20% of businesses sell in today’s market, because sellers only consider selling when it is time for them to retire, or to move onto something else. From this viewpoint, selling is an appendix to the main body of work, an add-on.
“This approach makes attempts for selling a business altogether riskier,” observes Paul Dodgshon of Uscita, “unless the seller has taken the time and prepared the business so that it’s ready for sale, at the time of their choosing.”
“Ensure that your business is always prepared for sale. Think about selling at the start, not the end”
“Business owners should see it as a long-term strategic goal, and build their business value with exit in mind,” Paul points out.
“Whether a buyer knocks on the door, or you decide the time is right, the business is already valuable,” he states.
Is the Goal to Sell?
Selling a business successfully means building its value, and taking steps earlier on in the lifecycle of ownership to do this.
“It might sound like looking at things the wrong way around, but you should begin with an exit strategy,” Paul advises.
“Our research confirms that a properly built business that is ready for sale at any time achieves an average premium of 71%, compared to a business that is just run until the owner wants to sell”
This means setting the goal of your business sale from the outset.
Are You Attractive?
“You must think like a buyer and consider what would attract you to pay more,” suggest Paul. “This might be security of revenue, robust cash flow, or durable systems that are in place. Most importantly, the business must be able to run efficiently in the absence of the business owner.”
“If the business is dependent on you to run it, then this will raise questions in a prospective buyer’s mind, about what it’s actually worth if they take it over,” Paul observes.
The exit goal, in this sense, benefits the business before sale. This is about building a sustainable business that works without the owner.
“At this point you can give yourself clear choices: to sell the business, pass it on to the family, or have a management team run it for you,” Paul concludes.
If you would like to build value into your business and ensure that it is always ready for sale, please call Uscita Solutions, in the strictest confidence, on 01606 535 020 or visit uscita.co.uk.
Alternatively, Uscita have developed a free guide, 8 Key Ways to Add Value to Your Business, which you can download here.
