SELLING THE BUSINESS- PREPARATION/ CLOSING THE DEAL

 

 

Get the end of year financial trading and profit And loss accounts completed for the last financial year.

 Have access to the current and previous two years trading results to also pass on to the prospective purchases.   

Groom the business for sale:

Building and assets should be cleaned, repaired and painted

Dispose of surplus stocks

Keep future stock purchases to a minimum

Review staffing levels

Monitor closely costs from date of decision to sell in an effort to improve profitability and show improvements in this area to prospective purchasers

Reduce owner's drawings to show cashflow improvements

Prepare asset schedules and valuations

Schedule month by month sales for the current year and the previous two years highlighting trends

Decide what is to be sold- is it the business plus land and buildings or just the business 

Concentrate on collecting outstanding debtors if these are to be on within the sale- you donít want the appearance that debts are slow to recover or irrecoverable.   

Consider whether you wish to handle the sale process yourself  or get outside help (e.g. real estate agent, business broker, accountant, solicitor) 

Work out a sales strategy- form of advertising 

Identify prospective buyers- approach them direct- a buyer who will create a monopoly by buying the business may be willing to pay more than someone else. 

Establish the price of sale-   this may be based on:

Book value- the total assets of the business less liabilities

Market value- fixed assets valued at an appraised fair market value plus inventory at cost plus an appropriate goodwill value

Replacement value- the current cost of reproducing the assets of a similar capacity business

Capitalisation of earnings- based on future earnings

Goodwill is basically the purchase of customers loyalty based on:

Location

 Reputation

Unique aspect of business

Profitability over the recent period

Valuing goodwill is a very subjective process with the result being open to wide variation

The seller may agree as a negotiating item to stay on with the new owner for a period of time.

 

 

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