Why start early
Owners often decide to sell and want it done in months. Buyers, though, look back over several years, and the things that worry them take time to put right. Looking at your business the way a buyer will, a year or two ahead, gives you time to fix what you can and to understand what you can’t.
The ten
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01Your real profit
Work out the profit a new owner could expect: add back one-off and personal costs, and allow a fair wage for the work you do yourself. This is the starting point for any valuation.
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02Clean, current accounts
Three years of accounts, up to date and reconciled, with personal spending kept out. Messy books make buyers nervous, and nervous buyers offer less.
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03How much depends on you
If the business stops when you take a holiday, a buyer has to replace you, and will pay less to cover it. Start handing over relationships and decisions now.
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04Your biggest customers
If one or two customers make up a large share of sales, a buyer sees risk. Spreading the load, or putting agreements in writing, helps.
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05The lease and key contracts
Check how long the lease has to run, whether it can be assigned to a buyer, and what your supplier and customer agreements say about a change of owner.
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06Your people
Who would be hard to replace, are their agreements in writing, and are their entitlements up to date? A capable team that stays is part of what a buyer pays for.
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07How things are done
Write down the way the business runs: pricing, ordering, the jobs only you know how to do. Systems on paper make the business easier to hand over, and easier to trust.
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08Equipment and stock
Know the age and condition of your equipment, and clear stock that won’t sell. A buyer will discount for both if you don’t.
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09Which way it’s heading
Buyers pay for the future. A business that is growing, even slowly, is worth more than one that has peaked. Know your trend and the reasons behind it.
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10You
What will you do after the sale, and what do you need from it? Talk to your accountant early about tax and structure: the answers can change the right time to sell.
Then get a realistic value
A valuation from a Registered Business Valuer tells you what the business is worth today, how that figure was reached, what a buyer will look for, and what to fix first. With that in hand you can decide whether to sell now, fix first, or simply know where you stand.