Ready to sell your business?

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Considering selling your business? Don’t take it lightly. In my experience it can take a full 18 months of preparation and negotiations to achieve a satisfactory sale of your business. Seems like a long time? It might, but consider what needs to be done:

·       analysing the value of the business

·       improving the value if you can

·       preparing the paperwork

·       finding a buyer

·       negotiating a sale…

and doing it all while continuing to run a successful operation.

Xero has recently released a succession planning guide which certainly contains some helpful general information. It says the biggest hurdles with selling your business are exit strategies, getting it sale ready and negotiating the sale itself. Those are definitely all areas where problems can easily arise. But right now, I think the bigger issue is actually finding a buyer. Business brokers tell me they’re struggling to find people who want to buy businesses – I’m hearing that “it’s tough going, the buyers just aren’t out there”.

The Xero report asks the questions “Why are fewer young people entering business? Our ageing business ownership reflects a lack of young entrants. What’s holding them back? Is the small business sector at risk of shrinking?” I think those are great questions, and there are lots of factors at play.

One factor is my generation of business owners. Yes, we’re ageing. But anyone with a great business is able to pick and choose their hours, while still making fantastic profits. It’s the same reason baby boomer couples are still in their five-bedroom family homes. We’ve assessed the alternatives and they just don’t add up.

When it comes to young people, I wonder if they’re focused on trying to get onto the property market? I’m not sure, but buying a house is so much harder than it used to be. Perhaps as Kiwis are now buying houses later in life and having kids later in life, they’re also delaying business ownership as part of the same overall pattern. This could be a missed opportunity, as I’ve discussed before, because a business could be a fast-track to buying a house if you do it right. And of course when there are few buyers around, it’s potentially a good time to buy at a competitive price.

Excellent businesses will always sell, and sell fast. But if your business isn’t a cash cow, you may need to think creatively about how you can find a buyer, what it’s really worth, and whether you can improve its value before you put it on the market. Succession planning incorporates all these steps, but it could take a year-and-a-half to get all your ducks in a row.