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How can you maximise the value of your business before sale? How long should you give yourself to prepare it for sale?
Andrew Rogerson, owner and MD of the Sacramento branch of the Murphy and Financial Corporation, kindly helps us answer these questions about how you go about selling a business.
In terms of timescales, Rogerson, who has owned five different businesses, selling the first for 2.5 times the original purchase price, says: “It probably varies with the type of business. Many businesses take about 15 months to prepare for sale, but most people don’t believe it should take that long.
“If you’re an entrepreneur, make sure you report all your taxes, and do it for at least 12 months so you can get it on your tax return, because that’s the basis of a lot of the negotiations about the selling price.
“A lot of business owners wake up one morning and say ‘I’m done, I want to get out of this, I’m putting the business on the market.’ Selling a business can be a quick decision, or they think about it for a long time but fail to take the right steps to put things in place.
“It could take six months to finally put the business on the market and sell it, but if you haven’t been reporting the sales, improving the look and feel of the business, etc, so you’re wasting that time. It takes a long time to sell a business so it stretches things out if you haven’t prepared properly.”
Looking through the eyes of the buyer will help guide the seller
Andrew Rogerson, Murphy and Financial Corporation
Asked what else a vendor can do to maximise the value of the business before sale, Rogerson advises: “One of my golden rules is that the seller should examine the transaction through the eyes of the other party. Many sellers are so used to doing the same things day in, day out, so that’s how they see things.
“A buyer comes with a different perspective. They’re seeing it for the first time, so they’re looking at the conditions of the business, the visual conditions – is it painted, does the carpet need replacing, does the equipment need replacing? Do the employees look motivated? Looking through the eyes of the buyer will help guide the seller.
“Also ensure the legal paperwork is all in order. If there’s a lease, make sure it’s up to date and in order. Make sure the legal entity is up to date.”
