Pre-planning that You Need to Make Before Selling your Business

Selling a business is not easy and if you are planning to sell your business, then it is important that you start planning early as it usually takes more than 9-10 months for selling a business. Having an exit strategy helps but the ideal time would be starting the preparation 2 years before the sell date. There are many things that you do so that you get a good price for your business.

You can start by making your business perform well. Start by assessing your cash flow, expenditure and taxes and check all the other business elements and operations to see whether they are running optimally. It is always wise to sell your business when it is doing well and is on its upswing, if you are considering selling it off. Like for example, people who are into seasonal business should try and sell it soon after the season begins. This is possible only when you plan ahead and you would run into any loss. Take the advice of business brokers and your accountants if required as they can handle the sale better than you and you can focus on running your business instead. Motivate and impress the buyers about buying your business. While it is true that a buyer would only a buy your business, if it has a proven track record. But the future also matters and hence, make use your own intimate business knowledge to point out to the new owners how to expand the business.

Before you think of placing you business for sale, there are many things that you need to know. The papers that should be in perfect shape before you approach a buyer or put business for sale in the market are:

•    Profit and loss statements of the past few years
•    Tax return details of the business
•    The lease documents and everything related it.
•    Loan documents that are related to your business.
•    Copies of equipment leases. List of equipments and fixtures
•    Copies of franchisee agreement (if your business is one)
•    List of inventory you have.
•    Copies of legal documents that are related to your business.

If you are small business owner, then gathering all the above items would take some time and after you have finished gathering all these, update all the information and complete the blanks. Make sure that you offer correct and updated information and have a good look at them. Prospective buyers would definitely review the details offered by you and would want to see the income and expenses as well. They would want to know whether your business is making any profits and most buyers would not buy a business that is running in losses. Every few buyers might also be ready to take a risk. Look for someone who is serious and when you look for buyers, try and know why they want to purchase your business. Many people buy a business after their retirement or due to job dissatisfaction as well.

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Things to know before Selling your Business

Before you think of placing you business for sale, there are many things that you need to know. Selling a business is not easy and you need to make many arrangements for it and you also need to make the required preparations as in terms of tax details, agreements and various other things. There are certain things that you need to keep handy, if you are going for a business sale and they are:

•    Profit and loss statements for the past 3-4 years
•    Tax return details of the business
•    List of equipments and fixtures
•    The lease documents and everything related it.
•    Loan documents that are related to your business.
•    Copies of equipment leases.
•    Copies of franchisee agreement (if that is applicable)
•    List of inventory you have.
•    Copies of legal documents that are related to your business.

Preparation

If you are small business owner, then gathering all the above items would take some time and after you have finished gathering all these, update all the information and complete the blanks. Make sure that you offer correct and updated information and have a good look at them. Arrange all the above documents in an orderly manner, so that you can present it to the prospective buyers. If you are halfway in the present financial year, then make sure that you have all the financial details like tax returns etc. of the last year and make all the details presentable so that you can show it to the buyers.

Prospective buyers would definitely review the details offered by you and would want to see the income and expenses as well. They would want to know whether your business is making any profits and most buyers would not buy a business that is running in losses. However, you might come across few buyers who are willing to take the risk.

As far as the buyer is concerned, it is important that you look for someone who is serious and when you look for buyers, try and know why they want to purchase your business. Many people buy a business after their retirement or due to job dissatisfaction. There are many things that the buyers would want to know regarding your business and some of them include the price of your business and how they can make the payments, inventory stock, annual increase in sales and various such things.

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How to Prepare your Business for Sale?

There might come a point in your life when you will need to sell off your business, the reasons could be numerous. It’s definitely not a one night call and a lot of considerations goes into making it a profitable sale.

Here are certain points to keep in mind in the time frame of the decision to calling it quits and actually handing over the stake.

1. It is important to keep all the financial documents in order, especially the last three years, the buyer will definitely be interested in that. If the accounts are kept audited then it’s an added benefit.

2.  All the paperwork especially the agreements with customers and suppliers should be up to date.

3. The business can be made to look lucrative if the tricks of the trade are passed on to the customers, suppliers and stakeholders before the sale.

4.  The employment contracts and the incentive packages should be kept updated, documentation of all the policies, systems and processes intact to ensure a smooth transition.

5.  It’s important to renew the lease of the premises if the business operates from such a place and reduce the working capital requirements by gradual removal of debtors.

6.  A tax advice needed to be sought to eliminate any hindrance to the deal.

To estimate the business worth:

It is advisable to look for a competitive market when planning to sell unless otherwise. A buyer looks at a company’s present earnings as well as its assets or forecasts. So if you can portray a good growth potential a higher price can be quoted.

What exactly are you planning to sell?

A business comprises of stocks, debtors and fixed assets. You need to confirm what exactly is your point of sale because this selection may be driven by tax reasons. For example if one wants to sell off equities then you need to offer warranties as well.

Have you identified your target buyer?

The buyers could range from an owner operator, a private equity firm or a listed company. The priorities differ as per the category. While a listed firm will look for detailed accounting matching with the industry standards the private firm might just want some amount of commitment from the buyer.

The payment procedure needs to to be finalised, whether you want it in full cash, scrip or a combination and whether you need to be paid fully upfront or instalments depending upon the company’s performance. The most importance transfer is the goodwill. It is therefore recommended to keep the same vendors and contacts of the company for a minimum period of time after the sale to acquire knowledge. The balance-sheet should include a very detailed analysis of the company’s debtors, provisions, fixed assets and stocks.

To conclude the main points to remember would be a very updated financial reporting, a well detailed customer contract and an advanced marketing plan to go ahead with a smooth and satisfying sale.

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Business Exit Strategies

Business exit strategies are something that each financial specialist in a business searches for. At the same time regardless of the fact that you are running a sole proprietorship, you require a passageway system.

Having a passageway procedure worked out ahead of time aides guarantee that you like the responses to those who inquiries and provides for you some control over your little business' future. Here are six passageway methods for little organizations to look over:

•    Liquidation: This is the nearby up shop and offer all the benefits retreat method. To profit with such a passageway system, your business need to have profitable advantages for. Liquidation is some of the time the main alternative, as there's truly nothing else to offer. In case you're in this position, you may need to invest eventually retooling your business so it could be worked by another person – making it a business somebody may need to purchase.

•    Keep your business in the crew: The fantasy of a lot of entrepreneurs, keeping your business in the family guarantees that your legacy exists on. As a passageway procedure, it can additionally provide for you the chance to prep your own particular successor and even maybe provide for you some proceeded with say in the business.

•    Offer your business to workers: Current workers and/or chiefs may be intrigued by purchasing your business. Organizing a representative buyout might be a win-win circumstance as they get a created business they know an incredible arrangement about as of now and you get excited purchasers that need to see your business keep on thriving. A worker buyout doesn't need to include a stock value arrange however. It may be as basic as having one of your current representatives assume control over the business.

Again, the best business strategy is the one that best suits your business as well as personal goals. For more such strategies, look into business exit strategies for small term investments.

Buying a Business in South Africa

If you are planning to start a business, then buying an existing business is the safest thing to do as you do not need to start from the scratch.

If you are considering buying small businesses for sale in South Africa, then you should be on the lookout for a business that is perfect for you and for that you need to invest some time put in a lot of effort. The cost involved is another thing that you need to take in account.  If all these things seem right to you, then buying a business for sale has many advantages. But there are certain things that you need to keep in mind while running an existing business and that is the fact that you are stepping onto someone else’s shoes and you need to be aware of every aspect that is related to the business.

Let’s have a look on the advantages and disadvantages associated with buying a small business for sale in South Africa:

Advantages

•    The biggest advantage is of course the fact that the infrastructure has already been made and all the ground work has already been done. This means that the problems that generally rise during the startup, has already been solved and rectified and you do not need to worry about this.

•    Obtaining finances would also be easy as the business already has proven track record.

•    There would also be a customer base you can rely on.

To have all these advantages, it is important that you hire agencies that help you in setting up businesses in South Africa.

Disadvantages

•    The initial investment might be very high.

•    The existing staff might not be happy with new owner or any changes that you made and you might be required to hire new people as well.

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Reasons to Sell a Business

None of the business owners think of selling off their business when they start it but there are times, when they are forced to think otherwise as selling the business is the only thing that they can do. Some of the reasons to sell a business include:

                                                        Retirement

This is one of the best reasons that attract buyers and it is one of the most common as well. It is also the best for you as your business will enjoy the lowest tax impact and you will also get the best value for your business.


Illness

This is possibly the worst that can happen to a business owner but at times, it is the best thing that you can do to save your business. You can also consider someone from your family to run the business or hire a professional team to do so.

Capital related problems

To start a business, you need to make a certain amount of investments and more than that you need to have certain amount in hand as well that you can use later. Lack of capital is another reason that forces people to sell off their business. You might be required to buy new machineries and you might not have the capital for that. Machine up-gradation can also be expensive.

Partnership disputes

This is another common problem that many people encounter. When the partners of a firm disagree, their focus shifts from the daily doings of the business to other things and the business starts to suffer. If the differences are beyond reconciliation, the partners should behave professionally and look for ways to sell off the business at a good price.

Burnout and boredom

Many people start a business thinking that they know a great deal about it and that they would enjoy running the business. But running a business is not easy and requires a lot of sacrifices. You might be required to stay for more than 16 hours in your office and that means sacrificing your personal life completely at least till the business starts earning profits. A lot of people do not expect this and once, they are into it, they realize that business is not their cup of tea and plan to sell the business. Many people also get bored with the business activities.

Failing business

A business that is running in loses for many years is tough to maintain. Such owners also choose to sell off their business.

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Business For Sale

Buying a business might seem the easiest way to enter in a business world. Sometimes it can be troublesome if you do not what to look out for both in regards to legal aspects and financial figures. Make sure of buying a business in South Africa. If you are considering a business to sell in South Africa, certainly there are several questions you should ask the seller like “why is he selling his business”, “what exactly is the condition of the business”. You should ask for the most recent audited files; you should ask the seller to provide the interim statements and VAT returns. Consider the good will of the firm and that is not related to profit margin earned by the business. There are certain things you should look after before buying a business and very firstly that is the turnover trend of the business.

The main questions arises when you came to the point that How does the business run when the owners go to the vacations? Most frequent answer is if you plan a holiday, the staff  is competent enough to look after the business themselves and as an owner who can depend on them.

Valuation is one of the big matter in business. What is Valuation? Business Valuation is the method of measuring the real worth of a business. It seems like a very easy things, but it is actually requires the right preparation. The results of business valuation depend on the assumptions as there is just not a one single way to measure the worth of your business as the term business value might mean different things to different people.

Sometimes small business owners make many important mistakes when performing a critical business for sale. Certainly a lot of things impact profitability in a business for sale such as strength of structure, operation in the business, timing and reasons for sale. When selling a business a business owner must time the sale very carefully, otherwise it might not be worked properly. Post recession recovery will easily allow for financials with at least three years of profits which drive up valuations.

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