When marketing a business for sale you will want to get the best result possible. So when is the best time to sell so as to achieve the best realisation of the value of a business?When Should You Sell?You are likely to get the best price for your business at the point when its growth prospects appear highest. The growth prospects of your business will appear best when:- your company’s business is growing (has been growing strongly and has prospects of strong future growth);- your industry is growing; and- the outside economy is growing.Ideally therefore, you want to be selling at a time when your performance is good and your prospects are better.It is a fact of life that many entrepreneurs are attracted to high growth industry as an expanding market offers easier opportunities to create a new business. What you must bear in mind however is that every high growth industry eventually settles down to a much lower rate of growth which cannot support new entrants into the market and often cannot support all of the existing players. Therefore many sectors, from skateboard shops through to nursing homes, golf clubs, and mobile phone shops, will show periods of high growth with large numbers of players entering the field only to have a ‘shakeout’ as the rate of growth declines and the less successful players go to the wall.In buying your business, purchasers will be putting a value on the prospects of the business.When picking your moment to sell therefore, it pays to ‘leave something in it for the next man’. Remember that selling a business is a process that will take some time. Many entrepreneurs are tempted to hang on into a growth industry, attempting to squeeze every drop of growth out of the business and aiming to sell right at the top of the curve.The danger with this approach is that you just might be very lucky and sell out at exactly the right time. However, bear in the mind that the sales process will take several months to complete, from start to finish. The chances are that you will not be successful and will miss selling right at the peak.The point to note here is that the value of the business sold when it is on the up in a high growth phase is likely to be much greater, or as great as the value of the business sold at the peak as growth starts to tail off, because the business during the growth phase will be being valued on the basis of continuing growth as perceived in the marketplace; whereas the value of the business as the market flattens out may be valued on greater absolute earnings, but potentially at a much lower multiple due to lower growth prospects.Moreover, if you wait too long in the business’ lifecycle and the market starts to decline, the value of the business will be based on a deteriorating growth prospects which will be reflected in the multiples achievable.You should review your business every six months or so and consider whether now is a good time to sell. In fact, asking yourself the question: ‘Would people want to buy my company?’ is a good test of whether you are generating value or not. Because if the answer is ‘No’, what does this tell you about your business?Keep an eye, therefore, on the value of your business and the rate of growth of it, its industry and economy in general.So What If You Need To Sell But Your Business Is In Difficulty?If your business is in difficulty, if you attempt to sell it you will have to accept that you are unlikely to get as much for it as you would if it was in good health; since as a distressed seller or someone selling a distressed business, the value you are likely to achieve for your business will be low.Therefore, if your business is in difficulties, in order to improve the price you are likely to achieve, it is usually best to attempt to turn it around first so as to be able to market a business with a better current trading performance and future prospects (a process sometimes referred to within the turnaround profession as ‘polishing the pig’).If your business has become quite severely distressed, and in practice would fail one of the tests for insolvency set out in the Insolvency Act 1986, in that it is unable to pay its debts as they fall due or that its liabilities exceed its assets, then there are further problems in attempting to achieve a sale.These are, that in the event of a liquidation, the insolvency practitioner who has been appointed will have a duty to look at transactions during the period leading up to the insolvency, particularly those undertaken when the company was technically insolvent, to see whether any of these should be reversed.In particular he will be looking for transactions at undervalue where he is able to argue that an asset has been sold off cheaply (such as you have sold the Rolls Royce to Joe, your brother, for £5 the day before the liquidation), or preferences, where he is able to argue that you have acted to put one creditor in a better position than others (such as you have paid Joe, or have transferred assets to him in settlement of his account prior to the liquidation, when you have not paid other creditors).Thus, any sale or transfer of a business’s assets in the period leading up to a liquidation may be subject to a challenge in the courts by a liquidator. They may also feature in the liquidator’s report on the directors’ conduct prepared for the Government’s directors disqualification unit on which they may decide to bring proceedings.So in summary, when you want to sell your business, choose your moment to sell, do not have it forced upon you. Be proactive about deciding when you want to sell your business and never allow yourself to become a forced seller of your business as a result of economic or other reasons. If you do, you will achieve a worse price because firstly, you will not be selling at the most opportune moment to maximise value, and secondly, because anxiety will force you to accept lower offers than you would otherwise consider.
How to Increase the Value of Your Business Before Selling
Whether you have an existing business or are considering starting a business, Michael Gerber in the book, The eMyth, suggests the only reason to build a business is to sell it.Sadly, many business owners wait too long to prepare the business and they do not have enough time to maximize the sale price of the business; some never plan to sell and others simply get caught off guard by an unexpected illness or unfortunate event.To help you not get caught off guard, it is best to start as soon as possible to prepare your business. It is never too early.Here are a few tips to help you increase the value of your business over the next 24 to 36 months.1. Clean up your books. With “good” accountants, you are likely writing off much more than just the required expenses of the business. The value of the business is directly linked to the profitability of the business. If you have minimized your profitability to decrease your tax burden, you will not maximize your selling price. To maximize your selling price, 3-4 years before you want to sell, start optimizing your business to maximize your profit. This alone can greatly increase the what your business will be worth to a buyer.2. Note abnormalities that will be adjusted for. When a professional values your business, they will look to “normalize” your books, called “recasting.” During this process anything that was not normal will be removed and this will increase the profitability of your business. For example, if you owned a restaurant and had to replace the hood system. This cost would be removed because it is not “normal” and does not happen every year. Therefore, removing it would increase the profitability of your business.3. Replace yourself and family members with staff. If you have family members working in the business, start to replace each one with non-related staff. When a buyer looks at your business, the business has less value and is riskier if there will be a mass exodus at the time of the purchase. Slowly, replace each family member with a staff member that would stay with the business after the purchase.4. Secure key employees. You will also want to create an employee retention program to secure employees that are critical to operations. A new owner will feel more comfortable knowing the critical employees are incentivized to stay with the business after the purchase and this will make the business less risky and more valuable.5. Design your business on systems. Every major task in your business should be documented and systematized. Although your current staff knows exactly what to do, for the buyer, having systems in place assures him or her that the business will run without you. Start by documenting the critical functions and then over time document all functions of the business. This task is time-consuming, but will make a huge difference in the sales price of your business.6. Have a growth plan. Now is the time to ramp up your marketing, sharpen your sales team and make sure you have a solid plan for growth. Buyers pay more for growing flourishing businesses than ones that are stagnant. Now is the time to make your business look the best it’s ever looked.By using these tips, you can drastically increase the value of your business and increase your sales price as well as sell the business faster.
Marketing Your Home Based Business – Business Ideas to Easily Double Your Exposure
Business entrepreneurs come to me for coaching help and the biggest problem seems to be how to find more customers. I show them the seven best ways to double the exposure of their businesses so that people, who want what they have, can find them.As a business student you should be learning how to maximize your exposure through at least seven different methods and if you’re going to put your time and hard work into these methods, they’d better pay off. One of the best and quickest things you should be doing is to provide not only products, but services as well.Small business marketing is not difficult, once you know the how-to secrets. Let me give you a real life stay at home business example.PRODUCTSScott started a home based business selling health products he truly believes in that improves the over all physical well-being of men and women. So far, all he has is products.Products are a great place to start, but he needs customers. People are only going to find him if he markets and this must be part of his successful business plan.Here is an excellent business idea and one of the top seven marketing tricks I recommend to those who build at home jobs. Scott can submit informational articles about each of his products. I give my coaching students the top 50 places to submit their articles in order to maximize their businesses. Entrepreneurs need to know where the buyers go for information and put themselves and their business articles right in front of them.When I first went into business my business coach only told me to go submit articles; never a word about what to say or where to submit them. For all the money I was paying him, I thought I should have received more help. My students will never say that about the resources they receive from me.Now for Scott, he’s got about 20 products, so if he is going to write & submit informational articles about his products, it will be a long time, if ever, before he runs out of article ideas.SERVICESBut what about Scott’s services? He doesn’t have any, yet. But let me show you what he can do. It’s easy and it’s fun.My service advice to Scott is to provide a Q&A interaction about his products and explain how his customers will benefit from their use. This can be done in seven different ways, but one of my favorites is to show entrepreneurs how to start their own online radio talk show.When Scott builds a radio show around his business he will then provide his potential customers with Q&A services surrounding his products. People usually need to be “sold” about seven times before they will buy what you are selling. (That’s why I recommend you market in seven different ways.)Like Scott, when you market your products with a Q&A service through your online radio show, you will extend your potential customer base into international neighborhoods you might not have otherwise reached.Once an entrepreneur like Scott decides on his business products and services, it then becomes a natural progression to get out there and market them into the seven best customer producing fields available.Here’s to your business success!