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We’re often asked the best way you can sell your business.
We’re often asked the best way you can sell your business. There are two key components at play when looking to sell your business: structuring the transaction and positioning the business to the market. Both elements are important and can significantly impact your result.
Structuring the Transaction
Structuring the transaction covers areas such as pricing the business, the terms and conditions attaching to the sale, key terms in the contract, and ensuring the transaction structure is as tax-effective as possible. Much of the structuring is about ensuring the vendors secure the most efficient and effective outcome from the sale. It is about maximising the vendor’s position.
- Pricing the Business: Determining the right price is crucial. Overpricing can deter potential buyers, while underpricing can lead to a loss of value.
- Terms and Conditions: Clearly defining the terms and conditions of the sale can prevent misunderstandings and disputes later on.
- Tax Efficiency: Ensuring the transaction is structured in a tax-efficient manner can save significant amounts of money.
Positioning the Business
Positioning to sell your business is all about ensuring that you achieve a sale and maximise your price. It covers areas such as ensuring there are no hurdles within the business that will limit its saleability, identifying the competitive position of the business within its market segment, ensuring that operating performance is as good as it can be, and that the business benchmarks well in its market. Positioning also includes identifying the best time to take the business to the market, how to take it to the market, and who the most likely buyers will be.
- Eliminating Hurdles: Address any issues that could deter potential buyers, such as legal disputes or financial inconsistencies.
- Competitive Position: Understand where your business stands in the market and highlight its strengths.
- Operational Performance: Ensure your business is performing optimally to attract buyers.
- Market Timing: Identify the best time to sell your business to maximise value.
- Target Buyers: Determine who the most likely buyers are and tailor your approach to them.
Balancing Structuring and Positioning
Positioning is about doing everything needed to maximise the probability of you being able to sell your business, whereas structuring is about getting the best outcome from a transaction once it has occurred. A lot of people make the mistake of spending most of their energy on the structuring of the transaction. It is important but only becomes important if the sale is achieved.
Structuring should be addressed first to help identify any key decisions that need to be made but put most of your effort into positioning the business for sale. To do this, you need an objective assessment of how the business compares in its market, its competitive position, and what if any impediments to sale exist – all the things a buyer will look at and look for when they assess your business. Most buyers believe that we are currently in a buyer’s market and will try to drive down price expectations.
Navigating the Market
Whether or not you are in a buyer’s market depends on your industry segment but regardless of this, you are in a competitive market. Buyers may be comparing your business to similar businesses but also opportunities in other industry segments. Securing a sale at the best possible price is about having your business positioned for sale. Preparation time is needed to achieve this well in advance of putting your business on the market.
Conclusion
Thinking of selling your business? Talk to us today about preparing to sell your business. By focusing on both structuring the transaction and positioning your business effectively, you can maximise your chances of a successful sale. Remember, the key to a successful sale is preparation and understanding the market dynamics. So, if you’re ready to sell your business, start planning now to ensure you achieve the best possible outcome.
Find out the value of your business with our valuations team or WA Business Valuations.
