Selling Your Business
Selling your business is a complex and time-consuming task. Link Business-Phoenix will carefully guide you through this transition and ensure you are taken care of every step of the way.
Selling Your Business
You have worked tirelessly to build your business. so when it comes to selling; you want to maximize your returns. Through our unique sales structure, LINK’s goal is to maximize your business return, while minimizing the stress of the sales process.
We achieve this by pairing you with knowledgeable business brokers with past experience in your field of business. Your broker will know all of the pitfalls of selling in your industry, meaning you can achieve peace of mind knowing you will NOT be exposed to any potential risks when selling your business.
We split our brokering teams into the following divisions:
- General Business
- Health & SPA
- Trade Subcontractors
Interested in selling a business? We want to speak to you
Questions about Selling a Business
How does the negotiation process work?
When a buyer indicates they want to make an offer, this needs to be in writing and in the correct format. Any verbal offers can become complicated, as they do not detail the terms and conditions of the offer. As part of our service we prepare a Sale and Purchase Agreement using the Auckland District Law Society’s Agreement (or equivalent territorial document), which details the offer being made, and the terms and conditions. We will liaise between both parties in the process of negotiation to facilitate agreement between both parties. In many situations we can recommend solutions to issues that may be of concern to either party. As a business owner you need to ensure you are protected by having the right clauses in the agreement and it is advisable to seek professional advice.
How long is the business marketed for sale?Most business owners want the sale of their business handled confidentially. For commercial reasons they don’t want their competitors and suppliers to know they are selling. Once again this is the advantage of using a specialist business broker. We work with potential buyers through the various stages and you only meet with them at the final stages of the process. This leaves you to get on with business and keeps buyers away from calling or visiting you at work.
We will prepare a comprehensive marketing plan for your business incorporating notes on how to present the business, a detailed Information Memorandum prepared by us, advertising schedule and website and database marketing. In many cases we find buyers from our database of qualified buyers. If confidentiality is required, any advertising is of a generic nature and never identifies the particular business.
How long will it take to sell my business?
This will vary depending on the complexity of the business and the industry. Normally, if all the information is available and the business is priced relative to the market for that type of business a sale should be concluded within 12 weeks.
What can I do to help sell my business?
Have all the information required ready and current. Buyers want to know what is happening in the business currently along with any existing or future trends. Have your accountant prepare up to date financial information.
What does an Information Memorandum include?
We prepare a comprehensive Information Memorandum on your business. This will typically include:
Background of the business, highlighting opportunities for a buyer and the reasons for the sale.
The sale process and description of assets etc.
The historical financials, trading to date and comment.
The business valuation appraisal.
Information on premises, including details of the lease.
Appendices including marketing material, plant and equipment schedule, etc.
This is prepared in draft format first for approval by the vendor.
What information do I need to prepare my business for sale?
It is important that you have all the right information and details available before you start to market the business. A business well prepared for sale will sell more quickly.
As part of our service we will assist you in the preparation of this information and once again it needs to be presented in the right way with the right information. This information is also required to establish the selling price for the business and certain calculations need to be made to work out the true net profit of the business. Items you should have available are:
Profit and Loss accounts from the previous 2 to 4 years.
Identify and quantify abnormal and/or non-recurring costs in accounts.
Identify all items of personal and drawings nature.
Copies of internal accounting reports for year to date and/or GST returns if available.
Copy of the Lease.
Brochures or information on your product or service.
Background on the business.
List of plant and equipment and any equipment leases.
Copy of franchise agreement if a franchise business.
Like many small business owners, you will probably have to search out these items and some may need to be updated. Make sure the financial information is current and accurate. If you’re selling halfway through the year you could get your accountant to prepare half-year accounts for the purpose of selling.
What is my business worth?
This is a very important aspect of selling your business and probably the most contentious. There will be many views on what constitutes value. Sellers will have one view, buyers another, accountants another, etc. There are multitudes of formulations, all of which produce different figures depending on who you’re talking to.
It is important to recognize the price range your business is likely to sell in. If you’re unrealistic it won’t sell and you and likely buyers will become very frustrated. You could also be harming the prospects of a sale sometime in the future. If you’re too low, then obviously you miss out or create suspicion.
Businesses sell in an open market that is with a willing buyer and a willing seller. The market determines the price – the true value.
When we meet with you we will gather detailed information on your business and then present you with a Market Appraisal. This gives you the price range we expect your business to sell for on the open market. This is not a valuation and cannot be used for that purpose.
For a formal valuation appraisal and opinion, many business owners use LINK to have a written opinion prepared on their business and establish the price range. This is useful in the case of one partner wanting to buy out the other partners, a management buyout or valuation for family estate planning.
When is the best time to sell my business?
We will schedule a meeting to discuss the specifics of your business and your personal plans for exiting from it. With our experience in business sales, we can prepare an exit strategy for you, taking into account the factors that will be instrumental in finding the right buyer at the right price for your business.
After we have an understanding of your business we will make suggestions on strategies that may be of benefit to you in the preparation of your business for sale. Buyers will be looking for certain things when considering your business and our recommendations can make a difference in effecting a quicker sale at a better price.
Recommended Reading for Sellers
As a franchisor, you must first define – what is your ‘ideal franchisee’? You need to put in a lot of time outlining the characteristics, skills, and experience needed for your franchise to excel. However, it is not simply skills and competence which your franchise will need to be successful.
Selling a business can take a lot of time and energy. By making use of our services you will understand more about why you need to carefully plan the sale of your business to maximize profits.
With so many variables, it can be very difficult to place an accurate value on your business. Defining your businesses market value is not a definitive science. There are many factors to deliberate – from the value of the assets, to competitor influence and other elusive elements.
Put simply, the value of your business will be determined by its current cash flow, past earnings and the sustainability of earnings. It will ultimately be judged on its ability to generate a consistent profit.
Valuing with LINK Business
Through LINK Corporate Division, we deal with large business acquisitions, divestment and the sale of private companies. When it comes to valuing businesses, we have a vast amount of experience, selling over 200 businesses for above $1 million in the past three years.
Being in the business of selling for over 15 years, we have built up statistical knowledge from our business sales database. These can be used, along with other, industry-specific databases, can be used as a starting point in determining a business’s value. We then use the PE (Price to Earnings) ratio to determine how profitability will affect the selling price. The PE ratio fluctuates, and is market driven.
Although historical earnings are key indications of value, The PE ratio will not necessarily be the best for your business.
An industry formula has been developed over the past decade by LINK, based on the “real world” market, taking into account the fluidity and fluctuations of the market. The majority of business valuation methods should take into account market evidence and industry-specific practice.
There are 3 different approaches to business valuation:
- Asset Based
How LINK Values a Business
The Valuation Appraisal Opinion
Our estimation on the value of the business is most often given on a Going Concern basis.
We look at the sustainability of earnings based on historical and current earnings. Potential buyers will want to examine a business’s ability to maintain its profitably into the foreseeable future.
We offer a comprehensive report which covers all aspects of the business, taking into account the following:
- Supplies financial documents
- The business make-up and infrastructure
- Its applicability to its market sector
- Certain risk factors and the market within which it operates.
We believe that business value is correlated to:
- The industry average multiplier on true earnings. This factor relies upon the market and may differ due to the perception of certain industry risks, the sustainability of earnings and historical transactions.
- The market worth of the unencumbered assets (e.g. plant, fixtures, vehicle, equipment and in certain cases the value of debtors) equals the worth of stock at historical cost.
- Intangible Assets. Due to the immeasurable nature of Goodwill and the numerous aspects that encompass this asset, the method of valuation used will rely upon the circumstances of each specific business. No sole method can be employed for every single business as each will have differing features regarding the combination of tangible and intangible assets. We can offer the market evidence of required ROI for business investments with multiple degrees of risk.