The 20 Golden Rules of Selling a Business
Continuing on from my article in January’s edition of Pattaya Business Supplement the Golden Rules of Selling a Business numbers 11 – 20.
Rule 11: Once you have got it looking good, ensure you keep it looking good.
As you go through the sales process remember that until you have actually sold the business and been paid it is not sold. So don’t let either your operations or your maintenance routine slip as you go through the process. Keep the business looking attractive, keep the hours being worked normal, keep the stock at the appropriate levels, right up until the time you have signed on the dotted line and collected payment.
Rule 12: Avoid surprises.
There is nothing that causes more problems in the sales process than an unexpected surprise discovered late in the day. Through prior preparation of your business, it’s lease, documents, asset lists and so on, helps prevent unnecessary surprises.
Rule 13: Get the best available help.
Good professional advisors cost money. But good professional advice makes you more money than it costs. Selling your business is probably the most important single transaction you will ever undertake, do you really want to do it on the cheap? This is why you should engage the services of reputable business broker such as TBAC who can guide you through every step of the sale process – it will be less headache and money well spent.
Rule 14: Be an active part of the sale process.
Whilst your business broker will handle much of the practicalities of contacting prospective purchasers and getting them interested, they will rely on you to make time to meet with prospective purchasers who are interested in buying your business and the broker’s own staff who need to talk to the horse’s mouth about all aspects of the business. Follow your brokers advice about dealings with prospective purchasers.
Rule 15: Understand that buyers want certainty.
Much like buying a second hand car, the thing that your buyer fears the most is that they are buying a ‘pup’ that you are getting rid of before some inevitable collapse or crisis comes home to roost. Your job is to be sympathetic to these concerns and do everything within your power to make them comfortable that they know sufficient about the long term prospects and risks of the business to be able to invest in it.
Rule 16: Be flexible, patient and proactive in negotiation.
Putting together the perfect deal is difficult and achieving a successful sale will require both parties to be flexible and creative in negotiation. Once an offer has been received, think about it carefully and come back with your constructive counter offers to help create a win – win situation for both sides and keep the negotiations open.
Rule 17: Be prepared to finance.
Insisting on an all-cash deal is likely to reduce the number of potential buyers. Also financing the deal may mean you achieve a higher price. TBAC has done more Seller finance over the last 12 months than ever before. TBAC can write a finance agreement with a minimum down payment on the business of 50% of the closing price and the balance of the payments made over a maximum of three years. In the event the premises were lease hold the finance agreement would be secured on the lease.
Rule 18: Terms are as important as price.
Since the negotiation of price is not simply about price, but also about broad terms of the deal, in addition to your target and drop dead price, you must have given thought to the objectives you are trying to achieve and your views as to your preferred deal terms including the incentives you are prepared to give before getting into these negotiations.
Rule 19: Expect to have to sign a non-competition covenant.
Since you have built the business up and know all the suppliers and customers, what is the value of your business to the buyer if you go out the day after the sale and simply set up a new business, contacting all those suppliers and customers again? In order to protect the value of their investment, most buyers will be looking for some form of non-competition contract/agreement.
Rule 20: Expect to have to offer training or consultancy to the buyer.
Having built the business up, much of the knowledge about how it works, it’s know how and its customer relations will inevitably reside in your head. In order to obtain value from the business, the buyer is going to need to have to transfer the knowledge, skills, know how, introductions, contacts and so on across to them as the new owner of the business. This may require you to stay on to give a short period of training over a few weeks in how the business operates or to stay for a longer period to act as a consultant.
Should you be considering selling or buying a business in Pattaya contact TBAC first on 0846774360 or email [email protected] or visit our website www.businessbrokersasia.com. We look forward to receiving your enquiry.