Home' Border Enterprise : Spring Summer 2010-2011 Contents enterprise
Vol 3. Summer/Autumn
SICK of struggling with turning a profit?
Tempted to try to sell up before, as
economists fear, the recovery cools or
you burn out?
The dream is doable, but before
you can ride off into the sunset, you must
build a persuasive commercial case. "Present
your business in the best possible light," says
Business Enterprise Centre executive officer
Maria Cook, who likens the preparation process
to spring cleaning.
The first step in freshening up is to make it
clear that your business has legs. According to
Cook, most ventures fail in the first three years.
If applicable, show that yours has lasted
longer, by coming up with the books. While
you are about it, prove you are in profit that is
growing on the back of a healthy client base,
ideally cemented by contracts.
Remember that investors are swayed by
sustainability - a platform for growth, according
to Cook. "People buy something that's well-run
and will continue to be well-run into the future
without a lot of resources," she says.
The value at which you peg your sustainable
nice little earner should be three or four times
annual turnover, plus the value of any stock.
If, say, you run a shop containing stock worth
$20,000, add that, Cook says.
You might also factor in the gain a buyer
gets from effectively removing a rival and, say,
acquiring a capable marketing team. Other
areas to account for include intellectual property
(trademarking), websites that cover your
core products and up-to-date insurance (no
outstanding claims), according to Cook.
Meticulous preparation and expertise
apparently make all the difference, as with selling
a house. "If I want to get top dollar, I might get
an outside consultant who is going to rearrange
all my furniture," Cook says, suggesting you
choose a consultant on the basis of a personal
recommendation or a steer from a consultant.
Professional input may be vital because
business owners "significantly" overvalue
their businesses, according to Joel Peck, a
professional valuer and certified accountant
with over 25 years' experience serving small
How to sell your
The key, Peck says, is to view your business
from a buyer's objective angle. Counter any
issues that make your business appear high-
For instance, Peck suggests, you should
develop "a succession plan", which provides
a star performer who can fill your shoes when
you go. If you appear indispensable and liable
to leave a void, the buyer may seek a discount.
Ditto if you pay unsustainably below-market rent
or are drowning in debt.
The author of The Business Valuation
Bluebook, Chad Simmons, highlights the need
to tackle less heavy but telling "intangibles".
According to Simmons, especially in the case
of a service business, the intangibles mark you
out from the pack.
So, shore them up. Ensure you have an
established image, a unique offering, a well-
trained, fairly compensated team and more.
"Position the business to attract the highest
possible amount of inquiries from qualified
buyers," he says.
Another, oft-cited secret of luring that buyer
whose cash may give you the breathing
space to kick back, even bludge, is basic:
Prospectors pick companies that show well, a
sign of solid underlying organisation. So, spruce
up your workplace - be it an office, shop or
And, in your head, be clear about your reason
for selling. As applies to any important sale, a
canny buyer will always ask why, if the business
you have built is so hot, you plan to cut and run
Well? Have your answer or alibi ready.
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