Are All Your Ducks in a Row ?
There are many reasons why your Small to Medium Business sells, takes a short or long time or does not sell at all, most Advisors agree, first step is having all your “Ducks in a row”.
“To sell any Small Business you must have All your Ducks in a Row or all your Peas in the Pod”.
If the Buyer falls in love with the Profit and not the Product you have half a chance provided the Product has a proven historic and future demand. Combined constant and multiple suppliers and a not too over crowded market will interest a serious buyer. Gross Profit margins are effected by waste and fixed expenses, Products that have a long shelf life are more attractive than perishable stock.
Like wise Industries that require Qualifications, Specialised Contractors or Unique Equipment present a higher barrier to entry but less interest unless Buyer has necessary knowledge.
Preparation of that small business for sale.
This is very important to help maintain the Buyers interest throughout their buying process. The right business preparation for sales practices will ensure this.
Initially, our part, from information supplied we must establish what we are selling and package it up in what is called an Information Memorandum or IM. Our experience tells us what most buyers and their Advisors need to know so we try and have all the answers ready.
Secondly we will take many Photographs of your Business and its processes or features , some disguising identity for marketing. For the IM we need to enhance the opportunity by highlighting the opportunities. This Confidential Information is only supplied to Qualified Buyers subject to them meeting with mutually agreed criteria. Inspections are also great for buyers to start to take ownership and to close the sale especially if you can book two parties in a row. They need to be Short Sharp and Shinny so strict procedures and limitations must be followed if they are to be effective. Don’t forget the old saying” you only get one go at a FIRST IMPRESSION, so make sure everything look s clean, operational and productive.
Pricing that Small Business to sell.
As an qualified Business Valuer knowledge is power when it comes to negotiating the best possible Offer and Result. Sometimes that is also not the Sellers expectations. Best practice is to start at an attractive figure and have a firm bottom line. As in Residential Sales, start too high and buyers won’t even ask for an inspection. Businesses are exactly the same, if the Asking Price is unrealistic for the return, you are unlikely even to get an enquire. Remember when Pricing that Multiples of Income are the same as how many Years before Outlay is recovered. Detailed presentation is an important part of a business preparation.
Price is also in proportion to Time to sell.
Advertising is only effective Marketing. When you compare what we used to spend on Yellow Pages and now building and maintaining Websites to make one product sale, spending 1-2% of your asking price to sell your whole business is a no brainer.
One of the most important requirements of retaining a buyer or formulating Goodwill is you Premises Lease, we sell “Future Maintainable Earnings”. The Future or time remaining is the term or options offered in your Lease and you would be surprised how many Vendors don’t have a Lease or don’t know where it is. Almost as important are the Terms included and if it is in fact a binding document. Franchise or License Agreements, Supplier, Customer and Service Contracts must be available for auditing and transferable.
Promotion to sell that small business.
Although last on the list it is the most important.
- Why advertise anything?
- To attract a buyer.
There is no free lunch and there is no free effective advertising when it comes to selling a Business.
BBN Brisbane Members are respectful when it comes to spending Vendor’s and quite often their money on Marketing. They receive Co-corporate rates in most printed Media and have axis to portals so that they can load advertising 24/7. We also only use the websites that rate highly on Google Searches and are easy to navigate for Buyers.