1. Know the reason why you are selling your business and make up your mind.
Any buyer will ask this question. You can ask yourself why. It might be because of retirement, illness, partnership disputes or breakup, business getting less profit or even losing money, or just feel boring. Take your time to think about the reason and decide if the reason weight enough to sell your business.
It is never easy to decide to sell your business. Selling a business, together with buying a business, running a business are all part of business process and none of them is easy. So, no matter for whatever reason, you must first make up your decision firmly, then you can perhaps go through all difficult process. As once you hit the road, you have to spend time and money, face other stress and challenge like losing your confidentiality and your current customers, but you can not go back.
2. Consult your team and understand the market, make a plan
You need to consult your accountant, solicitor for professional advice on legal and tax issues. You also need to get market updates from business brokers. From all these discussions, you know more about your business value your tax consequence and how to make a better arrangement to save your tax, the timing and cost of selling your business. And next, you are going to make a good plan on when to sell your business, how to sell a better price, how much sales and profit you want to increase so to maximize your sale price, how to have a smart tax arrangement.
3. Prepare well and increase the business value
In any buyer’s eyes, the business with the following attributes is more attractive and worth a better price, such as:
- Increasing profits and consistent income figures
- A clear and transparent financial records
- A strong customer base
- A new big contract coming soon.
So, you need to focus on increasing your sales, cut unnecessary expense or expense allocation, to show better figures. That is the key issue.
Second is to prepare the financial record. You need to provide some of the below documents according to different industry or size of the business,
- Three years financial statements, BASs, tax return if possible; Seller’s own management accounts which might be much easier to understand the whole picture.
- Lease, rental invoices, utility invoices; New lease proposal if the current lease is going to expire.
- Roster, organization chart and pay roll. Business owner and key staff’s responsibility and experience.
- Supply and purchase Contract and invoices; Franchise agreement and invoices, etc.
- Equipment list and stock level
One thing to mention before I forget is that many buyers want to buy an under-management business. So, if you can hire or promote a manager, make you as the business owner less important in running the business, it will be very helpful to sell your business.
- Hire a broker or sell the business yourself
Selling business yourself definitely will save you commission. You also do not have to spend time to choose a broker, establish a trustable working relation with your broker. On the other hand, you have to spend time with buyer’s enquiries, prepare the document yourself, find yourself alone to deal with every process. If your business is not too small to afford the commission or not that easy to find the right buyer, I would suggest you work with a broker.
You can read another article regarding “how to choose your business broker”.
As a Chinese business broker or Chinese background business broker, we have the advantages both in culture and language if you want to sell your business to Chinese buyers. Sinosmart Business Brokering can provide you more choices in marketing and buyer database.
- Decide the pricing strategy and marketing strategy, write a good IM.
If you have discussed with your accountant and business broker about business value, you know how much your business can be sold. But you will still want to put your price tag smarter, not too low but leave some room for negotiation, not too high to draw the buyers’ interest.
About marketing, you need to work out a marketing budget with your broker. Will it be listed on the market or rather an off-market sale? Would you consider selling to your competitor or employee and how to reach them while not affecting your business too much? How to protect your business by keeping confidentiality as much as you can? How to control the information flow according to the seriousness level of your buyers? What sale websites and social medias you will use? You can find the answers from your qualified broker. Sinosmart Business Brokering as a specialist Chinese business brokering agency, we are specialised in selling business to Chinese buyers. Our Chinese business brokers can speak both English and Chinese therefore we can help you communicate with the Chinese buyers easily.
Writing an impressive and high-quality Information Memo (IM) is very, very important. Include the needed information like business model, organization and staffing, sales and profit, strength and weakness, future opportunities for the buyers. It will convince the buyer to pay right price, save you and your broker’s time but leave some information in your hands to attract the buyers to meet and discuss further.
- Find the right buyer and make a deal.
You can rely on your broker to handle this process. As the business owner, you have to know several principles.
- Get at least two to three potential buyers to push the bidding price, making yourself more confident, even in case any buyer pulls out. But do not be greedy, manage your ambition in a proper way. It is not simple to manage several buyers at the same time.
- Make sure to screen the prospective buyers regarding the financial capability, business experience. Some landlord will ask the buyer to give personal guarantee to the lease and some buyers do not want to do so. Without the landlord approval, you can not sell your business.
- How much will you want to negotiate is a tricky question. You have to feel when you can stand firm with your price and when to compromise. Never regret you should have sold the business in the right price. Close the deal in the right time.
- Write the agreed terms down in order not to make everyone confused. It is always a good idea to sign heads of agreement and take deposit before you hire your solicitor. Do not leave you and your buyers in an open discussion between two sides’ solicitors which will cost you money unnecessarily.
Sinosmart Business Brokering has the experience and capability to guide your through the process, save your time and money, protect your interest and sell the best price as we can.
Sinosmart Business Brokering is a local Chinese business broker agency in Sydney, established in 2015, act as the bridge between local small business owners and Chinese business buyers