Selling a business? Ready for a balancing act?

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Selling a business? Ready for a balancing act?Selling a business is not an everyday event.  In fact it is not uncommon for it to be a once in a life time experience.

Like selling a house?

One way of describing a business sale is it’s a bit like selling a house – but on steroids.   Like a house sale, the buyer will have professionals checking things out which could lead to a price adjustment.  You also won’t be certain that the deal is done until the contract is agreed and signed.

Unlike a house sale it won’t be a case of putting up a ‘for sale’ sign and waiting for one of a ready stream of people to buy at a (roughly) established market price.   The number of potential buyers will be fewer and their perceptions of value will differ widely.  Selling a business is also likely to take longer and be much more involved than a house sale.

The balancing act

During the sale process you will supply lots of information to the buyer’s solicitors and accountants; some of it will be questioned or even challenged.  At the same time there will be also be discussions and decisions, including:

  • Agreeing access to sensitive information and perhaps business critical relationships.  The buyer will want you to give access as soon as possible, while you will want the opposite!
  • Staff relationships – deciding who should be told about the deal and when.
  • Negotiations with the buyer about the contract and also post deal matters.

While the deal will present its own challenges you will also need to keep the business on track – after all you are selling its future performance!  Also, if for some reason the deal doesn’t go ahead, you will want to still have a profitable business.

The financial side – are you deal ready?

There is likely to be a heavy focus on financial history and future performance.   Preparation can help you maximise the price and get the deal over the line. Here are 3 questions to help you decide if you are deal ready on the financial side:

  • Do you have timely management accounts and other information that give you a true insight into the business, its performance and prospects?
  • Do you prepare forecasts of profit and cash flow for at least 12 months ahead?
  • Are your accountants (both internal and external) able to help you prepare for and support you through the process? Will they have the time?  Do they have the ability to provide clear information and cogent explanations?

Wrapping up

Having someone looking in from the outside to work with your finance staff and external accountants can help get you in the right place before the buyer asks difficult questions and can be there to provide support through the process.

Thinking of selling your business?  If you aren’t deal ready on the financial side then do get in touch.

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