Are you and your business ready to sell?

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Andrew Bahlmann is the chief executive at corporate advisory firm Deal Leaders International.
Andrew Bahlmann is the chief executive at corporate advisory firm Deal Leaders International.

There are several key considerations that could help a business seller realise the value of his or her life’s work.

You may have decided to sell your business and are anxious not to get scalped when you put up the ‘for sale’ sign. You would think that the question uppermost in your mind is most likely to be, ‘How do I sell my business for the biggest profit?’ To a business owner, there are multiple variables that will determine a successful sale or not. The approach must be to follow a process rather than emotions.

Just as in running a business, you need to understand that a transaction will be taking place on two levels – that of your business and of yourself. This is because prospective buyers will look not just at the business but at you – and it’s most likely you’ll accompany the business on either a handover or permanent basis.

When selling a business, there are a few ways to ensure that you will conclude the right deal with the right buyer.

Know the value of your business

When asked how to get the best price on a business, the answer depends on who the buyer is. You aren’t selling a house or commodity here. You are selling something of value that could potentially be worth far more in someone else’s hands than in your own. That value extends further than your financial statements and it’s your job to demonstrate this value to a buyer.

Selling a business takes much longer than you think

There is never going to be a perfect time to sell. Selling a business that is growing and generating cash flow or profit is attractive to buyers, while waiting for a business to go into distress is not ideal when approaching the market.

A business owner will always find a reason not to go to market and runs the risk of leaving it too long.

It typically takes three to five years from the time of deciding to sell your business to the time that you can walk away from a successful transaction.

Never take a price to market

It sounds counter-intuitive but taking a price to market will guarantee that you will only ever get less than that price. The right price for a buyer is what they are prepared to pay for your business based on the value of your business.

Good governance makes all the difference

It is critical to always wear the ‘hat’ of a buyer when looking at selling your business. If you were in his or her shoes, would you be able to prove that what you were selling was in fact ‘real’ or is it theory?

Having strong governance doesn’t mean you need to run your business as though you are a listed entity. It means that your numbers and process are robust and have an audit trail.

Focus on your key selling point

You need to establish what a buyer is looking for and create interest by particularly emphasising that point. Note that this isn’t about lying or exaggerating, just rearranging paragraphs to direct attention to the selling point that most appeals to a buyer who is going to be absorbing a huge amount of information and needs some direction. Here are some typical selling points:

  • A killer team of employees and managers
  • A valuable brand
  • A unique technology, innovation, or niche
  • An optimum geographic location
  • Good profit margins

Replacing yourself

You need to ask yourself if you are building a business or are you self-employed. The biggest difference is that you can sell a going concern that can operate without you. If this is the case, then you will need to plan for succession in some shape or form. The good news is that this doesn’t have to be finalised before you sell, as the right acquirer can help you with that process. The only variable will be that you will need to remain in the business until such time as this is achieved.

In conclusion, selling a business is a bittersweet experience. You might be sad to say adieu to something you’ve sunk half your life into, but there is sweetness too.

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This article was written exclusively for finweek's 10 September newsletter. You can subscribe to the weekly newsletter here.

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