Peter’s Advice on What to Do (And Not Do) When Selling Your Business
Peter’s Advice on What to Do (And Not Do) When Selling Your Business
With over 40 years experience in diverse industries, Peter McPhee is the person you should have on your team when selling a business. His experience as a qualified accountant gives him the financial skills and analytical ability needed to provide innovative solutions to the inevitable challenges that occur when selling your business.
When Peter gives advice on selling, sellers need to pay attention.
So, What Are The First Steps?
“Obviously, contact one of the brokers here at ABS,” Peter replied with a smile.
“But seriously, you don’t want to decide to sell now or even in three months. We need time to get the business into a saleable state, decide the type of sale (share sale or asset sale), and how we will present it.”
“Then there is the financial side: accounting records, separation from any other business interests, family wages, and cash takings,”
“All of this may be second nature to you, but consider what the purchaser thinks. They are handing over big money, so they need to know what they are buying,” Peter explained.
Some of the changes required can be dramatic.
Peter shared an example of a previous sale. The strategy was to shift the business from Brisbane to Sydney to be closer to customers, saving significant freight costs and substantially increasing profits (and business value).
But that takes time. Peter recommends working with your broker for at least two years to iron out the wrinkles.
“This means you are forming a relationship with your broker, but like all relationships, sometimes they don’t work like all relationships. That’s OK. Be honest with yourself and your broker,” was Peter’s advice.
And a bit of unusual advice, “Assess whether your broker loves being a broker. You don’t want to invest two or three years in a broker who isn’t there come sale time!” he warns.
What’s a Common Mistake Sellers Make?
“Not being transparent,” Peter responded.
“Expect that the potential buyer is going to analyse every aspect of your business, so you need to be squeaky clean, or at least be upfront with the smudges.”
Do You Notice a Common Seller Misconception?
“Overestimating what their business is worth,” Peter replied.
“But there are ways to increase the apparent value. For example, buyers are often concerned that they will be competing with the seller in five years when the restraint of trade clause runs out. I suggest that sellers offer 25 years and the whole of Australia in the contract.”
“But if the seller is thinking of restarting, I suggest 25 years for only Queensland, which means they can restart in another state (or they don’t sell for that price),” he continued.
Any final advice?
“Yes, be nice to any prospective buyer”
“Help them understand why your business is so valuable. Even if you think they are getting a bargain, be nice,” Peter advised.
“And do not say, ‘I’m the only one who can run this business’,” added Peter. “I’d probably take you outside and slap you!”
Tags: selling exit strategy tips small business business broker
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