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Top tips to prepare your retail business for sale By John O’Brien
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ohn O’Brien is the founder and CEO of swimming pool and spa franchise network Poolwerx. He has helped many industry businesses change hands, and here he offers his top tips to help you get the best price.
1. Be sale ready before you put your business on the market
You wouldn’t sell your house without giving it a spruce up. First impressions are everything – refresh your store externally first then internally including signage and uniforms and your vans too. To maximise and showcase the value of your business, it’s important you truly understand where that value lies. Do you know your customer base and have a full and complete client database? Do you have a clear understanding of your assets – vehicles, stock, equipment, fit-out, technology. Can you provide a complete business history and solid financial records for the past three years? These are all extremely important to buyers and having this information to hand will make it easier to sell your business. Don’t forget to invest in your staffs’ training and retention. Buyers want peace of mind knowing staff are fully accredited and experienced when they come into a new business.
2. Be realistic about the value of your business
You have built a business with your blood, sweat and tears. It might even have been in the family for generations. Owners have a really strong emotional connection to their business – I know I do as a founder. But be realistic about what your business is worth. It’s easy for owners to sometimes have an inflated view of their business’ value – but buyers will only pay for what the business is worth. If you are trying to sell at too high a price, buyers will run away before negotiations even start. Typically, a business is valued on the average of the last three year’s profit multiplied by 1.5-2.5, plus stock at valuation. This price includes all assets but not your creditors and debtors – you still collect these after the sale. Remember to also budget for any additional fees – accountants, lawyers, brokers, stamp duty, training time, capital gains tax – to avoid any unexpected surprises.
3. Put your Intellectual Property (IP) into a reference manual
Your business system is what you are going to sell – how it will operate after you’ve sold. That’s why it is so important to develop a business manual. This may take months to develop and needs to include every touchpoint for the business – operations of retail and service, supply chains, HR systems, marketing, finance, etc, so potential buyers feel comfortable taking the reins straight away. Our industry is complex so uncomplicate it into a guide book – especially for those who haven’t had industry experience.
4. It is still business as usual
Now is not the time to slow down and take your foot off the pedal. You need to keep growing, selling, improving sales and your bottom line to make your business more valuable for a potential 22 SPLASH! August/September 2021
buyer. You get more for a business that has a growth curve going up than down. The sale process can sometimes take anywhere from six to twelve months, so be patient and manage your stress levels during that time. And keep it confidential and discreet, tell no one and don’t spook clients, staff or suppliers – unless one of them could be a buyer!
5. Communicate with key people
Through the sale process, keep those that must know in the loop – your lawyer, accountant, bank, landlord, fellow directors, your wife or partner. This will ensure everyone is on the same page and there are no surprises when it’s time to sign the paperwork.
6. Do you need to involve a broker?
While engaging a broker might seem like a hassle-free way to sell your business, there are downsides. Brokers are generalists, whereas an industry specialist will support you with significant expertise. Industry specialists will also have access to more motivated buyers compared to a broker. It’s best to use people who know our industry or have sold a pool business before. Selling your business directly will also save on commissions, which generally reach three to six percent – not exactly loose change on a million-dollar transaction.
7. Market far and wide
Finding the right buyer for your business is not easy, so don’t put all your eggs in one basket. To generate as many enquiries as you can, advertise on a range of platforms – Allbiz Australia, Business for Sale, Seek for Business, Linkedin, Facebook – multiple listings will help you reach a wider audience. Remember, the longer your business is on the market, the more the price will decline, so generating a healthy level of enquiries early is key to selling at the best price. Don’t forget buyers could be right under your nose. Often the best sales come from staff or customers, so don’t be afraid to discuss with them directly but be selective.
8. Timing the sale right
Some people think they need to sell at a particular time in the business cycle, whether the end of the financial year, or the end of the summer. That’s not the case. If you’ve lost your mojo, if it’s all becoming a little too difficult, if you’re finding it hard to smile at every customer that comes through the door, or hard to get out of bed – I dare say the time has come. One thing to look out for is the timing of your lease. You want to ensure it has more than two or three years to go, this will appeal to potential owners who know they don’t won’t have to worry about lease negotiation in the years to come, again, making your business more appealing. We all need an exit plan. In fact, you need to manage your business to the point where it is always sale ready, even if you don’t plan to sell, as it brings a state of excellence to your brand. And don’t forget, the right buyer never knocks at a convenient time. n Contact: www.poolwerx.com.au