Four Steps To Maximise Your Business Sale

Though it may seem counter-intuitive, when you’re entering into business – you should ensure that you have some notion of how you might exit that business with the maximum return. Therefore, one of your first questions should be  – what is my exit strategy?

A business can be a risky venture. Business failure rates – particularly in the early years – are sobering. Many businesses have a relatively short life cycle. Therefore, having an understanding of what it takes to get in, make money, and get out with the sale proceeds is smart.

But maximising a business sale requires advanced preparation and planning. The business sale process may be broken down into four steps.

• Preparation
• Marketing and negotiation
• Contract and due diligence
• Settlement and exit

• 1. Preparation

Following are the key steps to prepare for the sale of the business:

• • Set clear parameters for the sale
  • Structure review – what are the business and sale terms?
  • Tax Planning – includes income tax, stamp duty and GST
  • Review key agreements – Customer, Supplier, Lease, Finance
  • Review staff structure – Does the business rely too heavily on exiting owners?
  • SWOT analysis – market strengths, address weaknesses, highlight opportunities, mitigate threats
  • Results – Maximise your profit. Value is a multiple of future maintainable earnings
  • Review balance sheet items – withdraw excess cash and pay out dividend
  • Conduct due diligence to identify any weaknesses
• 2. Marketing and negotiation

There are a number of steps in the marketing and negotiation phase, following are some key actions:

• • Develop a marketing strategy
  • Consider brokers (but be careful)
  • Be wary of ‘tyre-kickers’ (people fishing for information and wasting your time)
  • Be prepared to be agile and move quickly
  • Consider a third party to handle the negotiation (owners may be too emotionally invested)
  • Consider confidentiality issues
  • Manage customer and market perception
• 3. Contract and due diligence

Once you have reached an in principal agreement it is time to organise the contract and be ready with the information to support the business sale. The key steps include:

• • Reach an in principal agreement first and then draw the contract (negotiating via contract is expensive)
  • Have legal team briefed and ready to draw contracts
  • Set a fixed time period for the due diligence process
  • Provide and budget for the time required by personnel involved in the due diligence process
  • Use technology for due diligence (data room)
  • Have information ready to go
• 4. Settlement and exit

Finally, you’ve done the deal and now need to transition the business to the new owner(s) in the right way, including:

• • Planning for a smooth transition
  • Transfer of goodwill (introductions and relationships)
  • Communications to customers, suppliers, staff and financiers
  • Transfer of contractual arrangements
  • Final taxation and compliance lodgements
  • Wind-up of un-utilised business structures

When well-planned and conducted, a sale process is much more likely to realise a premium in proceeds. Taxation planning to structuring the deal in the right way can also lead to significant taxation savings.

Want to know more about how Bentleys can help you?

Make a time for a chat with us today. We’re here to help you get where you want to be.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.