10 tips for selling your business
Dynamic Business is pleased to offer you this extract from Small Business for Dummies by Veechi Curtis. Read on for more information on how to win a copy of this useful guide.
In This Chapter
“Preparing for sale, years ahead
“Identifying the secret weapon that makes your business worth five times more
“Compiling the ultimate sales document
“Doing the buyers’ job for them: Due diligence and more
“Finding a buyer
At risk of recommending you put your feet up before starting to run a marathon, I suggest you start planning the sale of your business before you so much as open doors for trading. Any business benefits when you, the owner, can stand separately from the business. Plan to build a business that still generates cash even when you’re away, and that doesn’t rely solely on your efforts. Otherwise, you’re not really creating a business; rather, you’re creating a job with a pile of overheads.
Preparation is the key to securing a good price for your business. Plan to sell when the timing is best for you. You don’t want to be forced into a sale, or simply to sell your business because someone fronts up out of the blue and offers a half-decent price. Instead, plan to exit with a sense of flair, with money in your pocket and a smile on your face.
364 Part VII: The Part of Tens
Plan Your Exit from Day One
Always try to have an exit plan simmering away, even if you don’t plan to sell any time in the immediate future. Ask yourself the questions: If I were to sell this business today, what could I get for it? Can this business run independently of me? What assets or business systems do I have to sell? Try to create a formula that you (or someone else) can replicate again and again, so that your business idea can expand. For more on this way of thinking, see if you can get your hands on either copy of one of the ` best-selling titles The E-Myth or The E-Myth Revisited, written by best-selling author Michael Gerber, and both quite transformative in the way Gerber provides models for turning a simple business idea into a valuable asset.
Time the Sale to Suit Yourself
Too many business owners get forced into selling, either due to ill-health, personal circumstances or because they’re struggling to survive. You can’t hope to get a good price in this situation. Rather, aim to time the sale to suit yourself, doing the groundwork at least three years (yep, I said years, not months) in advance.
The first step, which is only possible if you plan in advance, is to declare every cent of cash takings. (Sure, you could choose to keep a ‘black book’ where you record cash takings but, hey, if you offer visible proof that you’re happy to be dishonest about your tax, how can a prospective buyer trust you not to be dishonest about other things too?)
The next step is to improve your net profit every which way you can. Remember, for every dollar you increase your bottom line, you can probably realise at least five to ten times that amount in the increased value of your business. I knew a husband and wife team who ran a nursery business with a turnover of $600,000 and average net profits of $50,000 a year. As part of preparing to sell, they bumped up prices by 10 per cent. Sales only dropped a little but, even so, they immediately made an extra profit of $40,000, increasing average profits to $90,000 a year. The result was an instant increase in value of their business of about $300,000.
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