When it’s ‘Go time’: how to sell a business

If you’re running your own practice, or some other business in the eye-care industry, chances are you’ve invested a lot of money in your enterprise over the years. So it makes sense to do all that you can over the life of your business to maximise the return on your investment.In many respects the final sale price for a business is a simple function of the profit it makes. For an arm’s length sale, somewhere between two and three times profit (before interest and taxes) is pretty common, but there is a range of factors that can influence the multiple you can achieve and push it towards the higher end. Plus, if you’re willing to be more flexible, you may well get an outcome that is far more satisfying than mere dollars and cents.So what can you do to get your business ready?GET YOUR FINANCIAL REPORTING INTO SHAPEAside from being good business practice generally, it’s also a good look to donstrate to any potential buyer that you have timely and accurate financial reporting at your fingertips.You’re most likely using a computerised accounting syst and/or a practice managent syst, so make sure it’s up-to-date and reconciled, and that you have review processes in place to monitor the numbers.UPDATE YOUR DOCUMENTS AND KEEP TH HANDYYou always want to be sure that the legal documents relating to your business are up to date and accurate. We’ve seen instances of businesses that don’t even know where the documents governing their very existence are!{{quote-A:R-W:450-Q: A straight-out sale can sometimes be a deterrent to potential buyers, especially if that buyer is a current ployee. }}Such documents can be critical at certain stages in the life of a business, and may include leases, hire-purchase agreents, client and supplier contracts, staff contracts, and company minute books. A potential buyer will want to know that copies are readily available so there are no nasty surprises.IMPROVE YOUR MORE OBVIOUS WEAK POINTSIf you’re thinking about selling soon, it’s especially important not to over-capitalise, since it’s unlikely that you’ll recover significant expenditure on assets through the sale price. However, it’s actually not a huge deal sometimes to improve a first impression, and this can go a long way in making your business more attractive.It may be as simple as a coat of paint or a few repairs, or making sure your team is well trained in how to greet and service clients. This also includes a review of stock levels and disposing of obsolete stock. If you’re running a practice, have a look at your frames and rove any that are out of fashion or simply not saleable.COMMUNICATE WITH YOUR STAFFIf a sale is something that is on the short-to medium-term horizon, be honest with your staff. Let th know that you’re planning to sell and that you’ll do your best to ensure that they can continue with the new owners if they wish.At the same time, try and give more responsibility to senior staff mbers. It’s best if the business doesn’t appear to depend too heavily on your own involvent. You may even find that a potential buyer is already in your midst.PREPARE DETAILED INFORMATION ON YOUR BUSINESSCover everything, like day-to-day operations, information on your competition, unique advantages, issues and challenges, and a history of your business. You should also document all of your procedures, including any software you use.This is particularly important for independent buyers. If you sell to a large corporate, they will most likely have their own software and procedures. But for individual buyers, they will want certainty that they can continue to operate the business as a going concern.BE AWARE OF OTHER COSTS THAT MIGHT BE INVOLVEDFind out as much as you can about the costs associated with selling your business. You need to take these into account when considering how much you will get from the sale. The costs can be significant, and may affect the timing and structure of your sale.{{quote-A:L-W:450-Q: It’s actually not a huge deal sometimes to improve a first impression, and this can go a long way in making your business more attractive. }}You’ll want to know whether any capital gains tax (CGT) is payable, but even more importantly, there may be things you should be doing now that might save tax at the time of the sale. For example, are you eligible for the small business CGT concessions? If not, is there anything you can do to change your eligibility?You might also want to know what your GST obligations are on the sale too. You wouldn’t want to find out that you have to rit 10% of the sale price after the contract for sale is signed.BE FLEXIBLEIt’s not always in your best interests to seek the highest possible lump sum for your business. In fact, a straight-out sale can sometimes be a deterrent to potential buyers, especially if that buyer is a current ployee.It’s important to think about what you want in the context of your overall lifestyle goals. Selling to a current staff mber is often a lot simpler and can ensure that your ‘pride and joy’ continues on with the culture and values you have worked so hard to establish – but it may mean doing things a little differently.If you’re close to retirent, maybe you’re not quite ready to stop work altogether. You might want to gradually work your way out of the business, dropping back to part time for a few years while still having more time for holidays and other leisure activities.One solution may be to continue working and effectively ‘finance’ the sale for the buyer by allowing th to repay you through future profits. Rather than bowing out immediately, you get a few more years of salary and profit while the buyer is relieved of the burden of bank finance.There are as many options as there are businesses, but working with someone you know towards a mutually satisfactory result can often achieve the best outcome for all concerned.USE PROFESSIONALSYou know your industry, but you’re not expected to be able to find your way through the sale of a business unguided. That’s where the suits come in. It’s essential that even before you’re ready to put your practice on the market, you discuss your options with an accountant, lawyer, business broker, business appraiser/valuation expert, tax expert and/or financier.