Many business owners have the vast majority of their wealth tied up in the business, even their home is likely used as security for a business loan, so it is vitally important to be mindful of the value of the business and also how readily that value can be realised. The ideal is to be working towards a desired sale price from the day you start business. This way you are prepared if life throws you a curve ball and you don’t get to choose when you will sell.

Luckily, factors that make a business attractive to potential buyers are also going to be beneficial to you, the owner, and you can enjoy those benefits until such time as you choose to sell.
Like other investors, business buyers are generally looking for maximum profits for minimum risk and these will be the main drivers in determining the sale price of the business. The following is a list of features you can work on. You will see that they generally relate back to either profit or management of risk.

• Focus on growth. Buyers will look for a rising trend in sales and in profits.
• Identify potential. Buyers won’t pay for potential but it will certainly pique their interest, and you are bound to have seen opportunities that you haven’t had the time or energy to pursue
• Aim to have a range of clients so you are not vulnerable to the loss of one source of revenue.
• Have more than one supplier to secure your ability to service or supply your clients.
• Build a great team by engaging reliable staff and training them well, to the extent that you are confident the business is running smoothly in your absence. Take time out from the business to demonstrate that it does indeed function as expected when you are not there.
• Have documented systems and procedures to ensure that there is consistent production or service, delivered in the manner you instructed, and also as a reference point in case of you or a staff member being unavailable. This is also an important factor in transitioning ownership.
• Have all records up to date, tidy and available.
• Be transparent. If you are aware of a weakness that you haven’t been able to overcome, disclose it. It is much better to be out in the open than have it turn up during due diligence and make the buyer suspicious of what else may have been hidden from him or her. Besides, what is your weakness may be someone else’s strength and an opportunity for them to improve the business.
• Determine a realistic sale price. Many serious buyers will be watching the various web sites for new listings and if you miss consideration at this point that opportunity is gone. This is evident in the level of enquiry that we get in the first week of listing compared to the number of enquiries over the term of the listing. At NAI Harcourts North Shore we have access to statistics of completed transactions across the full range of industries to use as a basis to calculate a comparable and realistic sale price.

This list is certainly not exhaustive. For more ideas imagine yourself to be a buyer. What would you like to see and what would you be prepared to pay for the business?
When the time comes to go to market, talk to a business broker. We can help you decide on that all-important sale price and we will be actively working with genuine buyers.
Have you tried looking for a business to buy? It is a daunting task! So little information is given that many of the enquiries you make will be for something completely different to what you had in mind. It is not a deliberate ploy to frustrate you, but a result of the fact that most businesses do not want their staff, clients or suppliers to be aware the business is on the market in case they become concerned about the future arrangements and start looking to move. As a result, we have had the opportunity to speak to numerous buyers who have not found what they are looking for that we can introduce to more relevant businesses. This relates to new enquiries as well as our existing data base, and being part of a team further increases our reach to genuine buyers.

www.northshore.naiharcourts.co.nz