Are you ready to sell your business? Is your business ready to sell? Is it the right time to sell your business? Three questions that from initial glance appear to be mostly the same, but they’re actually each specific to three separate areas.
Are you ready to sell your business?
This is the mental process behind selling. What plans have you made that you’d like to pursue? Are you approaching retirement, or perhaps you’d just like to take some time with the grandchildren, or playing golf every Friday. Maybe you’re tired of the hassles that come with operating a business, and wish there was someone else to step in and take it forward without you.
Is your business ready to sell?
This relates to the business trading position and its potential. Business owners often believe that a buyer will want a business if it’s the market leader. Well that might be true if its a multi-billion dollar company, but for the other 99.3% of businesses it’s not the case at all.
For the small or medium sized business buyer, they need to see good positioning in the local market, but more importantly, they need to see room for additional growth. After all nobody wants to buy a business at the peak of the market. There’s only one way to go, when you’re at the peak.
Is it the right time to sell your business?
This really covers the business positioning, as we’ve already discussed, but more importantly, considers what the market is like. Just as with every other marketplace, the Mergers & Acquisitions (M&A) market also works on supply and demand. It’s fair to say, there’s probably always an abundance of businesses to buy, but the problem is, how many.
At the time of writing this article, there were 2.4million small businesses listed for sale in the USA alone. How many other sellers are you competing against to find a buyer? Don’t forget, you aren’t just competing for a buyer with your local competition. A buyer will look for a business nationwide, but also across disciplines. Let’s consider an example.
Let’s assume you have a cleaning business based in Birmingham, UK. Initially you might believe that any potential buyer will only be looking for cleaning companies in the West Midlands region, hence you’ll believe these are your only competition to attracting a buyer. FALSE! First of all, a buyer will, most of the time, be looking nationwide, specifically if they really want a cleaning company. There are the odd exceptions, like when a buyer is already operating a business and wants to expand locally, but the majority of buyers don’t want to operate the business, so location becomes less important to them.
Second, a buyer is looking across disciplines. In other words, as a cleaning company, you’re essentially providing an outsourced service. Widen your net. Your potential buyer is looking at all outsourced services, and that could be anything from Electrical services, to cleaning, to Marketing & Recruitment. Even if its a locally focused buyer, your competition just grew by 100x.
We’ve talked in previous articles, about the baby boomer generation, and the impact it’ll have on the realization of selling your business. Over 70% of business owners will reach retirement age in the next 5-15 years. In the UK, on average that equates to an additional 21,000 business owners with a desire to sell their business, EVERY MONTH.
Put that into perspective, there are only 20,000 businesses listed for sale in the UK at this present time. Can you see the flood coming?
But if you genuinely want to sell the business, there are some very important things you need to get right. We’ve written lots of articles on how to achieve a sale, but it’s important that you know which hoops and hurdles you’ll face, when it comes to selling.
Let’s look at a brief checklist to get you started on that process now.
Are your Accounts up to date?
Are your monthly management accounts up to date?
Are there any legal disputes that need resolving?
Are all employment records up to date?
Are your financial & legal agreements on hand?
Is the business reliant on you, or could you leave for 12 months, and it continue to keep trading?
Do any of your customers account for more than 10% of your sales?
What are your plans, after you’ve sold the business?
How much do you think your business is worth?
Is your business profitable enough to employ someone to replace you?
There are lots more questions that relate to how a buyer will perceive your business, this is just a handful. So let me ask you again. Are you ready to sell your business?
We hope you’ve received some value from this article, and some information that you can use to move forward toward your vision.
If you’re confident that selling your business is the way to go, or perhaps you’re undecided, it’s important to consider the significant amount of effort and resource you’ll need to make it happen. It’s a full time job. - The time investment alone is enough to put anyone off. So imagine for just a minute, that you didn’t need to do all of this work. What if this could be done over the next 3 - 5 years (by someone else). Everything we’ve listed in this article, is what you’d need to do, if you were selling through a business broker, or direct to a buyer.
Unlike other private equity firms, our focus is on growing businesses at the smaller end of the market. We’ve worked in, and grown our own businesses in the exact same fields you work today. We’ve spent years coaching and supporting small businesses just like yours, developing their teams, and helping them to grow, but now, we’d like to help you.
We have a solution for business owners that need to sell their business immediately, or for those who want to stick around for a few years.
If you’re considering the options to grow or sell over the next five years, read more about how we're helping others just like you. Click here to read about our unique approach to helping you get what you want with the YokeFormula™ for your business.
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