Exiting your business for the highest price!

By Reuben Buchanan, Managing Director – Axstra Capital Pty Ltd

If you are a business owner and are looking to sell your business, to achieve the best price requires a lengthy and detailed process in terms of preparation, time, costs etc. Anyone who has been through this process will tell you it is no easy road – however nothing worthwhile has ever been easy. With a little effort and a lot of preparation for an exit, you can dramatically improve the result.

Risk
Basically it all comes down to risk – both within your existing business and risk of whether it can sustain its current earnings or improve them in the future. Also external risks such as competitors, technology, sector trend and the general economic marketplace. So the key to success is to lower the risks you can control for the incoming buyer. This will greatly increase your chance of getting the highest price possible for your business asset.

When selling your business
If you have decided to sell, there are many things to consider. But fundamentally, the more stable the business is, and the rosier the future potential growth, the higher the price you will achieve. Also who you sell to is very important. This is called Strategic Value. You might be worth X to one buyer – but to another buyer – say a competitor – you could be worth double that because they can leverage off your business or take you out of the market.

Here are some points to consider when looking to sell a business:

  1. Make sure your financials are up to date – including historical (last 2 years) and future (next 2 to 3 years)
  2. Make sure the business systems and process are documented
  3. Tidy up your marketing material
  4. Have a business plan updated and ready to hand over
  5. Make sure your staff and management are the best you can find
  6. Make it easy for the buyer to come in, acquire your business and also easy for them to execute growth once they own it
  7. Allow adequate time to prepare and execute the sale. Fire-sales will not get you the result you want
  8. Make sure your team of advisors are up to the task. This includes accountants, lawyers and corporate advisors
  9. Do a legal and financial check up on your business and address any key risks that are uncovered before engaging with any potential buyer
  10. Ensure all your contracts are in place and up to date – this includes staff, suppliers, licenses, contracts, distribution agreements, leases, etc
  11. Ensure your IP is owned and can be easily transferred to the new buyer

There are many other factors which can affect the sale price of your business such as:

  • General market conditions – both on a macro and industry specific level
  • Your ability to ‘market’ your business to the right potential buyer – so targeting is the key
  • The buyer’s current situation and timing – e.g. they might be going through a re-structure and are not in “buying mode”. In the case of individual buyers, maybe they are about to go on holidays or are in the middle of selling another business. So timing here is critical.
  • Luck – sometimes you can be in the right place at the right time

The best advice is for entrepreneurs and business owners to get as much knowledge on raising capital as possible.

IMPORTANT: This information is general and should not be taken as specific advice. Readers should always seek their own professional advice. For more information, please email enquiries@axstra.com.au

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