The Biggest Sale of a Lifetime

The inside advantage to selling your life’s work for maximum value.
A famous story tells of an African farmer who gave up his farm to look for a diamond mine, so that he could become fabulously wealthy. He sold his farm and wandered off into the vast African continent for 15 years until finally, broke, alone, sick, tired and exhausted he threw himself into the sea, and drowned!

Meanwhile on his farm, the new farmer was out watering his mule in a stream that cut across his land. He noticed a rock that threw off light in all directions – which was found to be a diamond. They returned to the stream to find another, and discovered that the farm was covered with acres of diamonds!

The farmer had gone off seeking diamonds elsewhere, without looking under his own feet.
It is the same for your business. Your business is a field of diamonds that you can capitalise on when you sell your life's work.

Why sell your business?
Maybe:
1. The fun has faded
2. You have lost a major client, supplier or team member
3. You have hit a patch of ill health
4. The market collapses
5. You have an immediate need for cash for a equipment upgrade or to pay a partner out
6. New legislation means you have to reconsider your options
7. Litigation
8. There is no family successor
9. You want to spend more time with your family or go on an extended holiday
10. A better opportunity has come along

Most business owners will only sell a business once in a lifetime. Without previous experience it can be difficult, complicated and emotionally a very stressful experience. It is also a major financial decision and can be a costly one unless all areas are considered.

Preparing for sale

So what do you need to do? Be prepared before you list your business for sale. Just like diamond mining, a bit of digging and preparation can substantially increase the value you generate.

A comprehensive plan for selling your business will give you the highest probability for gaining maximum sale value. With as little as 3 months to 2 years preparation, you will significantly generate a more profitable exit from the business.

First, you need to think like a buyer.

They want to know ‘what’s the financial and strategic benefit to me to buy this business?’ Basically – what's in it for them?
When buyers look at a business, they place a dollar value on things such as profitability, business risks and the profit & growth potential. By looking at these factors and creating a solid plan to address them prior to listing your business for sale, you can dramatically increase the sale price of your business.
The following model shows how you can increase the value of the sale of your business 2 to 9 times.
The Proactive Business Sale Model
To work through this example, the goodwill component of a current business has a net profit after tax (NPAT) of $100,000.
Activity Impacted Value
1. Current business not prepared for sale $200,000
2. Introduction of structured marketing, people, operations, & financial systems for better team and clients, strong systems & greater profit (+50% NPAT) $300,000
3. Reduce risks through agreements with team, clients & suppliers & stronger diversified client base with better products/services (+33% NPAT) $400,000
4. Strong history of profit growth (+25% NPAT) $500,000

So being motivated for a higher sale price is a key, but more so I believe a critical question to ask when selling is, ‘what does life look like after the sale?’
Then if we confront that issue, we find you’ll be willing to put time & effort into preparing the business for sale. Possibilities will open up, for e.g. for some, the pursuit of having a long holiday in the short term, honorary charitable work, developing another opportunity. There really is an extensive checklist available.

Preparing for Sale Action Steps
1. Review your business model. Determine when you want to exit the business and implement strategies to increase sustainable profits, reduce risks, & build a platform for growth potential in order to boost ultimate sale value.

2. Create a personal plan. No longer working in your business requires some careful thought and planning). So talk to a professional about life after the sale of your business to include. For example develop another opportunity, a long term holiday, charity work etc.

3. Assess your sale price. Have an independent valuation prepared whilst also being aware of the current market value of comparable businesses so you don't under or overvalue your business. Then see how this lines up with your personal financial goals.

4. Checklist of potential buyers. Assess potential buyers for your business from a wide pool of potential buyers including your competitors, customers, employees or alliance partners. Start building relationships with them and create public awareness of your business well before the possible sale date to maximise your buyer pool. Find out their reasons for wanting to buy your business as this will help create negotiating leverage.

5. Develop your documentation. Develop your sale information memorandum outlining your business & its potential to a buyer. Additionally develop all legal documentation including for example 1. Confidentiality agreements 2. Heads of agreement 3. Due diligence checklists

6. Share sale agreements 5. Shareholding and employment contracts 6. Trademark transfer to name but a few of the more relevant.

7. Create a marketing plan. Develop a strong marketing program to a potential buyers pool to attract and develop multiple buyers which will build competitive tension and improve your sale value.

8. Develop a strong negotiation. Negotiations are emotional at the best of times – but when they are about the value of your life's work it is harder to be impartial. Remain detached during negotiations or have someone negotiate on your behalf in order to retain the upper hand.

9. Get good advice. From my personal & professional 25 years of experience, using independent, experienced professional advisors, accountants, lawyers or business sales consultants who have taken a number of owners through the sale process is invaluable. The best advisors understand your industry so find a specialist who understands and values what makes a successful professional practice sale. Look at these professional fees as an investment not a cost.

In essence, how much your business is worth is inextricably linked to “who will buy my business?”……

The bottom line is if you prepare your business for sale, you will gain a greater sale price, a quicker sale, as well as increasing your personal profits during the preparation phase. Isn't this the true mining of the diamonds at your feet?