We’re often asked about the best way to sell a business.
Two key components in selling a business are structuring the transaction and positioning the business for the market. Both elements are important and can significantly impact your result.
Structuring the transaction covers areas such as pricing the business, the terms and conditions attached to the sale, key terms in the contract, and ensuring the transaction structure is as tax effective as possible. Much of the structuring is about ensuring the vendors secure the most efficient and effective outcome from the sale. It is about maximising the vendor’s position.
Positioning the business for sale ensures you achieve a sale and maximise your price. It covers areas such as ensuring there are no hurdles within the business that will limit its saleability, identifying the business’s competitive position within its market segment, ensuring that operating performance is as good as it can be, and that the business benchmarks well in its market. The positioning also includes identifying the best time to take the business to the market, how to take it to the market, and who the most likely buyers will be.
Positioning is about doing everything needed to maximise the probability of a sale occurring, whereas structuring is about getting the best outcome from a transaction once it has occurred. Many people make the mistake of spending most of their energy on structuring the transaction. It is important but only becomes important if the sale is achieved.
Structuring should be addressed first to help identify any key decisions that need to be made but put most of your effort into positioning the business for sale. To do this, you need an objective assessment of how the business compares in its market, its competitive position, and what if any, impediments to sale exist – all the things a buyer will look at and look for when they assess your business. Most buyers believe that we are currently in a buyer’s market and will try to drive down price expectations. Whether or not you are in a buyer’s market depends on your industry segment; regardless, you are in a competitive market. Buyers may compare your business to similar businesses and opportunities in other industry segments. Securing a sale at the best possible price is about having your business positioned for sale. Preparation time is needed to achieve this well before putting your business on the market.
Thinking of selling your business? We are business advisory specialists; talk to us today about preparing your business for sale. Reach out here.