“The time has come – I want to put my business on the market”
In our accounting business, this is a phrase we hear from our clients from time to time. I suspect we may hear it quite a bit more over the coming few years.
It has been said for quite some time now that “baby boomers” will be retiring in droves and there will be a huge number of businesses going on the market. Well, we haven’t quite seen that yet.
Anecdotal evidence suggests that these “baby boomers” may have been holding off selling because they don’t know what to do afterwards (“what am I going to do after I sell up?”) and perhaps because the GFC delayed them getting a good price.
In any event, we will likely see more businesses changing hands soon, so if you are thinking of selling, it may pay you to read on…….
We recently assisted a client to sell their business. Our client was a long standing one – he and his wife had been in the business for over 30 years and had done pretty well. As with most businesses, there had been some lean years but overall the business had provided them with a good life.
They used a broker to help them sell the business. The broker found the buyer and facilitated the necessary communication and agreements between the parties. Using a good broker can help the process hugely. Brokers already know a range of potential buyers and can often match those with the seller.
There was a time for due diligence – this is where a price is already agreed on but the deal is still subject to the purchaser checking “under the bonnet” to make sure the business runs well and what is being represented by the seller is in fact true eg are the sales that are reported, actually there & likely to be there in the future?
In the end the deal was done and the price paid. But there were a few things that in hindsight we all learned could have been done better. These include:
- While we would all agree that a “gentleman’s agreement” on certain “small things” is an honourable way to go, sometimes after the event it may not be that secure. Our advice – tie down as much as possible in a written signed agreement. This can save a good amount of heartache after the event.
- As the seller, don’t allow the purchaser to make use of your supplier accounts, because they need time to get their own ones sorted. Best they sort this themselves.
- If you are selling stock, tie down the valuation methods clearly and succinctly, and know how you will deal with obsolete stock. Get specific written agreement from the purchaser about that.
Finally understand that when you sell a business that has been part of your life for a long time, there will be an emotional parting from it. There will be a sense of relief but also a sense of loss. Prepare for this well and you will emerge much stronger and ready for the next challenge.