One of the biggest concerns we come across, when speaking with family businesses, is who they can hand the reins over to within the family. Often this results in the family having to face that dreaded decision of parting with the company to a third party.
But, how do you ensure you will get the best price or for that matter any offers at all ?
Here’s some frequently asked questions and answers on how to approach the matter.
Q. When is the best time to sell my business?
A. Where possible, it m aces sense to sell when the market is strong and to complete the deal well before any anticipated downturn.
However, the strength of your performance is important too. Needless to say, you will always command the best price if you sell when you are approaching the peak of a pricing cycle rather than waiting till things have got so tough you just want out.
Buyers can usually detect when a business is selling because its owners want to, and when they have to.
Q. What is my business worth?
A. There are numerous valuation techniques, but none are cast in stone. Its a bit of a cliche but a business is pretty much worth what a prospective buyer is prepared to pay for it.
Q. How do I set my asking price?
A. This is equally tricky and its best to see what other companies in a similar market have been sold for. Set the price unrealistically high and you’ll deter serious potential buyers. Set it too low and you’ll miss out on any premium bids.
If you can let buyers set the price through competitive bidding, thats a perfect scenario although they may be somewhat reluctant initially . Most will bid within a predictable range, but it is not unreasonable to expect one or two to bid substantially higher.
Q. How do we find a prospective buyer?
A. Most business owners often assume they know the most likely buyers. But it’s surprising how many times an unexpected buyer shows interest.
It pays to research your suppliers, competitors, and customers. Look for situations where a business is acquiring new companies and where yours will add strategic value to their own products and services. If you can show how this would extend their customer base or bring much needed expertise to their operation, then this could yield results.
Q Should I use a broker?
A. When it comes to selling your business the service of an experienced and trusted intermediary is vital if you are going to obtain the best deal but do your research here too – speak with your accountants and solicitors. Do not divulge any sensitive information to a prospective purchaser without the necessary confidentiality clauses in place and have a plan on how you intend to structure the deal once its gone through to make maximum mileage from any tax planning and ask for suggestions on how you can invest the money from the sale to get a reasonable return.