Buying or selling – preparation is vital
Content provided by a guest contributor.
Whether you are considering buying or selling a business in the near future, the importance of preparing for either of the two cannot be underestimated – for most people, the buying and selling process will only happen once in their lives, so spending enough time on it is vital.
Preparing to buy a business
There are many factors one needs to consider before going ahead with the search for a suitable business – some of the more important considerations would be:
- Why do you want to own your own business? Be really honest with yourself as to the main driving force
- What are your strengths and passions?
- Is your family 100% behind your decision and are they fully aware of the sacrifices you will have to make?
- Are you risk averse bearing in mind that all businesses have risks attached to them in varying degrees?
- Do you have at least basic business skills required to run a business (daily operational activities such as cash-flow, dealing with clients, giving credit, people skills, operating a bank account etc)?
- What funds do you have available to buy a business? Bear in mind that financial institutions expect a contribution – expecting to be provided with 100% funding is not a realistic expectation. Consider approaching a few to establish their minimum criteria
Preparing to sell a business
Selling a business is no different than selling any other product – whatever your reason is for selling, you need a strategy to take your business to the market to avoid unnecessary frustration and to ultimately realise a fair price for it. Again, there are many factors to consider, the more important of which would be:
- Allow sufficient time to prepare – at least 3-4 months
- Financial – have up to date (preferably audited) financial statements, clean up stock & debtors, declare / bank cash sales etc
- Physical assets – have a comprehensive asset register, clean up premises (paint if necessary), repair machinery, discard unnecessary records. Remember, first impressions count
- Contractual matters – ensure leases, employment & supplier contracts etc are formalised
- Straighten out records – have accurate and complete accounting records of all activities. Also establish adequate systems and controls
- Obtain a valuation of the business and agree on a suitable selling price
- Compile a comprehensive report / disclosure document for potential buyers
It is of course impossible to cover every eventuality that may arise during the buying or selling process, although solid preparation upfront will assist with ensuring that your respective goals are achieved within a satisfactory timeframe & with a more than acceptable financial outcome. Good luck!
Barry Wiseman is a director of the IQUAD Finance Solutions (Pty) Ltd who provide business development services, assist business owners raise funding & secure equity capital. See www.iquad.co.za and www.bwifs.blogspot.com