Preparing a Business for Sale

When selling a business, financial information is the primary qualifier for any prospective buyer. Whilst financials are evidently important, there are other areas which require just as much attention in order to achieve the best outcome.

The marketplace for selling businesses is highly competitive and in hospitality you will likely be up against tens or even hundreds of other comparable opportunities, swimming in a sea of listings and a mire of mixed representations. It is therefore important to effectively package and communicate the quality of your business offering to your audience... and to get their attention.

Here are some pointers:

Review your Lease

At the outset you need to have a saleable lease in order to have a saleable business. Most purchasers will be looking for a tenure of at least five years and have an understanding of critical lease terms. If your tenure is less than five years then it would pay to approach your landlord to discuss a term extension or a new lease term so that you can be confident of what you can represent to your buyer. Similarly if there are ambiguous lease terms such as an impending market rent review, it would be prudent to contact your landlord regarding how they intend to calculate any such rent increase.

Organise your Paperwork

Before you go to market get your paperwork in order so that you are prepared at the outset. You can utilise POS data, finance software and financial documents to back up your representations; and the more information you have available - the more confident your buyer will be. The same will apply for collating all up-to-date local authority approvals and licences attached to the premises of the business.

Communicate your EBITDA

Now that you have your financials organised it is worth consulting your bookkeeper or accountant so that you can arrive at your EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortisation). This value is the true profitability of your business, and it removes all expenses and taxation methods that are individual to the business owner(s). A business is often sold at a multiple of the EBITDA so it is important that this figure is accurate and can be verified.

Summarise the Business

With financials prepared you will be able to make informed representations about the business. The introduction or advert copy is the first thing that the buyer will come across when enquiring about your business, you need to promote all of the positives and be prepared to address all of the negatives, so that you can effectively qualify all buyer interest promptly.

Document your Operations

Try to look at your business through the eyes of the purchaser and try to treat the process as it you are franchising your business operation. The purchaser will want to minimise business disruption through the handover period and the purchase price will be maximised if the buyer can seamlessly operate the business at the outset. Make sure that core business processes can be managed and maintained by existing staff members, implement staff training and delegate more responsibilities before you sell. Also it will pay to document your organisational structure, list all staff and duties, provide a typical roster and the total wage costs for all employees.

Implement a Manager

If the business is heavily reliant upon an owner operator then this will be of major concern to the purchaser; it is best practice to implement a manager or to at least pass core management duties to existing staff before you intend to actively promote your business sale. Try to remove an owner/operator from day to day operations as much as possible, so that the impact of an owner leaving is less significant.

Dress to Impress

Just before you decide to list take a moment to step back from your business and look at it through the eyes of the buyer, consider asking close family, friends or even your customer for their thoughts on the appearance of the business premises. Business owners will naturally perceive such details as insignificant to the overall business operation, but the devil is in the detail and you do not want to give the purchaser any reason to submit a lower offer or revise an existing offer in order to rectify any issues or carry out any repairs.

Price Realistically

Now that you are prepared to list your business for sale make sure that you price realistically so that you have the best chance to achieve your price in the shortest possible timeframe. The information gathered at this point will put you in a strong position to go to market and your paperwork should go a long way in supporting your asking price.

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