John Denton - Preparing Businesses Ready For Sale
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 - working with business owners helping them prepare their businesses for sale or lifestyle, and sometimes selling them as well.
Testimonial
I tried a very well known company in Perth to sell my business. After one interview and a look at some basic figures they said; “it wasn’t worth anything and they weren’t interested”. After picking myself up I started asking around and was recommended to John Denton of Performance Business Sales. What a breath of fresh air that was.
John and PBS weren’t interested in the figures in the beginning, they were interested in the business and the owners, then the figures. The process was professional, honest and respectful and the final sale price of the business was fair and reasonable. John stuck by us (husband and wife directors) to the end and this may sound a little strange, but I actually enjoyed the process as it taught me so much. Chris and Eva Godwin, Former business owners.
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!!!
