John Denton - Preparing Businesses Ready For Sale
Don’t Blow Your Money When Trying To Sell A Business!
This will be a short post as I want to get it to you quickly. I have advised clients about this in the past but following a recent marketing campaign by a firm claiming to be business brokers, I thought I should re-post this message.
Basically, there are a few large corporations out there making claims to be business brokers and selling businesses via very expensive glossy advertising in magazines. Sometimes the company involved claiming to sell businesses has interests in the media publication involved.
Their Main Interest Is To Sell You Advertising - Not Sell A Business
Before you engage anyone to sell your business, check out the following;
- Are they registered business brokers complying with Australian Government regulations?
- Do they know and operate in your local market? That is, do they have an office in the state and people on the ground?
- Did you get a written appraisal of your business or did you just ‘agree a price’?
- Can they give you names of business owners for whom they have sold businesses?
Just make sure you do your due diligence on anyone before you list with them and find out how they will go about selling your business, not just placing an expensive advertisement in a magazine. For detail about how the ACCC and the NSW Government view these people click the title to this post to see the reports. It includes a report from the Australian Government and an Australian Institute of Business Brokers press release.
On a slightly different topic - also beware ‘online business evaluations’. Many of these are based in the USA and in any case are very basic and unlikely to reflect true local market values in your area.
To get the low down on valuing a business and preparing it for sale, attend one of my half day workshops. DETAILS HERE
Until next time - keep those numbers going up!
John Denton
Hi Business Owners,
It’s almost the end of another financial year – well at least it is in Australia. The end of the year is a good opportunity for reviewing your business performance over the last year as well as setting strategies, goals and plans for the coming year.
One of the opportunities which is often overlooked, is the opportunity to restructure your chart of accounts in your accounting package. Why would you want to do that?
When I am asked to help a buyer who is looking at buying a business, the meeting is usually me asking a long series of questions. Many of the questions end up being questions which the buyer should be asking the seller in relation to the business and their reason for selling.
At the end of the meeting with the buyer, they will often say “Thank you, now I know what I need to know and what questions I should ask”. Then I sit and wonder why they hadn’t thought of these seemingly obvious questions before. But of course, if you haven’t been through the process of buying a business before – then you don’t necessarily know what you need to know!
It’s all about asking the right questions to get the right information to be able to make the right decision FOR YOU! The trick is knowing what information you need!
There are some basic areas that you need to explore as a potential buyer and therefore areas as a seller which you need to have covered. These are…….
Read the full article on my web site CLICK HERE
In Australia we are famous for the “She’ll be right, mate!” attitude. Unfortunately, when it comes to legal contracts and the exchange of large sums of money if “She ain’t quite right mate!” then it can end up costing someone a lot of money, time and stress. And none of us need any more of that.
An example is the legal entity of the seller’s business and the buyer’s business. It’s one of the first questions I ask people. And they tell me it is, e.g. XYZ Pty Ltd. It gets put on to the paperwork and the owner signs the Authority To Act, for example. In spite of repeated questions it can turn out later, possibly at a critical time, that there are multiple directors and some don’t want to sell. Or, there is a “trust” involved and the Pty Ltd is a trustee for the trust.This can cause all kinds of complications down the track.
Another common mistake is the incorrect spelling of business names. Over a period of time the owner forgets that they registered XYZ (W.A.) Pty Ltd and not just XYZ Pty Ltd or something along those lines. When I pull them up for it they ask “Well isn’t that close enough?” to which I always answer “If you are one digit out dialing a telephone number, does it really matter?”
Of course it matters!!! And then settlement of the deal gets delayed and people get angry and frustrated and start looking for people to blame. No matter how much as brokers we strive to get the correct information and detail, we are usually at the mercy of the owner’s memory (apart from certain things which can be searched on government databases) – which has often faded with time!
TIP: Always check what you are writing on forms BEFORE you fill it in. And the old adage “NEVER ASSUME” – please!
P.S. Check out my upcoming workshops in Perth – next one is March 7th 2012 – CLICK HERE for more details and registration.
Regards
John Denton
“Helping business owners achieve their life goals through buying and selling businesses!”
John Denton on “Why I got in to this business!”
Today’s tip - put everything through your accounts! Why? Because taking cash out of the business is both illegal and dumb! If your business type attracts a multiplier of say, three times net profit at point of sale - and you take $20,000 cash out of the business (off the profit) - then it costs you $60,000 at point of sale. Dumb! And illegal! And we will not take it in to account. I need a coffee!!!
If you want your business to be saleable at some point in the future, then it really helps to have your financial reports structured correctly. Then it needs time to “wash” through the business. With the end of a financial year approaching this is a great time to review your bookkeeping / accounting practices. See my post on this at CLICK HERE
