Six Reasons You Need to Think About Selling Your Business

Selling your business is the furthest thing in your mind when you are in the positive stages of a thriving business.

It’s a bit like hammering in a For Sale sign into the front garden of the dream home you have just moved into. But, it is valuable for yourself and your business to think about selling from day one.

Here are six things you haven’t considered for why you should think about selling your business sooner rather than later.

1. The Curb Appeal

In the same way that a well-maintained home with good curb appeal will attract better buyers, a business that appears well-maintained will be easier to sell than one with peeling paint and rusty machines. Perception is reality and a business that looks neglected is only attractive to a niche group of turn-around specialists. Consider your business’ curb appeal from its onset to set you apart when the time comes to sell.

2. Motivation

When you think about selling your business from its start-up, you are forced to think like a third-party investor – which you are! As a third-party investor you will be concerned about the sustainability of financial performance, growth potential, absence of dependencies (such as owner dependency), positive cash flow cycle, recurring revenue, customer satisfaction and intellectual property. These are all positive things an owner should be concerned about - as opposed to purely the ‘hands-on-tools’ functions - if you want to have a sustainable and profitable business. Having the end in mind will motivate you to do just that. 

3. Company Structure

It is essential to pick your business structure with the end in mind. While you are not necessarily locked into any structure, changing it can be costly. Different structures affect things such as taxation, asset protection and costs in operating. These things must be considered early as your business structure will affect how your business sells.

4. The Five D’s

Often business owners will say, “I want to wait until sales improve before thinking about selling” or “just after this financial year” or “after I have procured this business pitch.” But don’t allow these 5 D’s to catch up with you:

• Death
• Divorce
• Dislocation
• Dissolution
• Declining sales

There is nothing that can be more financially and emotionally demoralising than a forced business sale. Having your business ‘prepared’ through all its phases, will soften the blow of an unexpected, forced sale.

5. Tidy Systems

An attractive business is one who looks appealing to buyers through all spectrums of the business’s growth – from start-up to a large company. That includes having good profit track records, solid and organised financial information, plans for growth, properly managed staff and intellectual property. These require suitable and accurate reporting systems and documentation. Rather than cleaning the house as the buyers are walking through, set up tidy procedures from the beginning. Creating an ‘buyer friendly business’ from the start is the easiest way to foster a culture of compliance, process and paperwork.

6. Perspective

When you think about selling your business from its start-up, you will better understand that the running of a business is not the goal itself, but merely the means to a bigger goal – namely a solid return on your labour, effort and investment. This makes the emotions of selling your business easier to deal with – especially when selling occurs at retirement.

At Frank Law we have the specialists to go on this journey with you and assist you in running your business with the end in mind.

If you would like to get in touch with Frank Law please email pvandenheever@franklaw.com.au.

This is not legal advice.