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 |
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Dispose of surplus stocks |
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Keep future stock purchases to a minimum |
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Review staffing levels |
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Monitor closely costs from date of decision to sell in an effort to improve profitability and show improvements in this area to prospective purchasers |
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Reduce owner's drawings to show cashflow improvements |
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Prepare asset schedules and valuations |
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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
don’t 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 |
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Market value- fixed assets valued at an appraised fair market value plus inventory at cost plus an appropriate goodwill value |
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Replacement value- the current cost of reproducing the assets of a similar capacity business |
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Capitalisation of earnings- based on future earnings |
Goodwill is basically the purchase of customers loyalty based on:
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|
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Reputation |
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Unique aspect of business |
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Profitability over the recent period |
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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.
If we can assist further, please email TotalAccounting as follows:
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