C H E C K L I S T F O R S E L L I N G A B U S I N E S S
You have made the very important decision to sell your business, so what are the next steps? At McDonald Real Estate we are focused on giving you a very honest and accurate appraisal of your business. We believe a good quality business marketed at a fair price will always sell reasonably easily. To work out a fair value for your business, there is a range of information we will require before we take the step towards putting a price on your valuable asset. Once all of the relevant information is put together it is a much easier task to value your business in today’s market. We also strongly recommend that you talk with your professional advisors. Your accountant and solicitor will be able to assist in preparing a lot of the information, and give you advice as to the health of your business. Depending on their background and experience, they may be able to help with the value of it, and along with our knowledge, we can give you an expectation of the market value of your business. The more information that you can provide to a buyer, the more confident they will be when weighing up all their options. It will also make the sales process easier and shorten the time needed for investigation both before and after an offer is made. On the following pages there are guidelines to follow to help you prepare for the sales process. If these steps are adhered to it will save a lot of time and energy. Before you begin, ask yourself ‘would I buy this business?’ Your answer may determine the next move! S E L L I N G Y O U R B U S I N E S S
These are some of the answers that we will need to provide to an interested party: 1.History of positive and stable earningBuyers want a business that shows a consistent profit over several years. 2. Acceptable return on their investmentA buyer wants to know they they will make a reasonable profit for the money they have invested after buying the business 3. Experienced and skilled staffAre there good staff agreements in place? 4. Potential to grow the turnover and profitsCan the business continue to grow? 5. Location 6. Stock levels 7. Chattels list and plant 8. Database- Is there a good database of customers and suppliers? 9. Lease term and agreement 10. Demographics of your customers 11. Maintenance scheduleThis is especially important with businesses that have a large amount of plant and equipment 12. Key performance indicator measurements, e.g. gross profit, average sale, conversion rates, items per sale, seasonal sales changes 13. Marketing plan 14. Handover period- Will you be willing to train a buyer? To give a good representation to prospective clients, all of these pieces of information and answers to questions should be ready and available to us so we can get the maximum price available for you. WH A T I S A B U Y E R L O O K I N G F O R
Does the business have a competitive advantage? Is your industry subject to potential significant change in the next 5 years? Experts warn that much like selling a house, business owners will only have one chance to get a top price. So it is essential to prepare their business first. New owners will want to feel they can walk in the door and pick up the reins immediately . With smaller businesses or family businesses , so much is in the owners head and it is important to have this information written down. The business needs to be in a state that will continue without you - otherwise goodwill has no value. If the business is currently reliant on you, you may need to consider whether you are prepared to continue working in the business post 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 is more likely to sell quickly. The following are a range of suggestions for you to review prior to listing your business for sale: Undertake a business diagnostic - this is a thorough review of your business and should include a SWOT analysis (i.e. identify your businesses strengths, weaknesses, opportunities and threats) It is designed to assess where the business is currently at and identify of areas where the business can improve, e.g. P L A N N I N G C H E C K L I S T
Make sure your accounts are up to date, providing full details of the financial performance including - • Profit and Loss accounts from the previous 3 years. • A schedule of abnormal and/or non-recurring costs. • GST returns for current trading year to date. • Obtain industry average figures from your accountant to establish how your business compares to the industry average (we can also help with these) Produce a cashflow forecast - A sale may be reliant on being able to demonstrate good cashflow. First impressions count - If any area of your business premises is looking neglected, now is the time to sharpen it up and re-paint or redecorate as required. This includes cleaning the plant and checking any outstanding maintenance work is carried out. Create an operations manualDocument all business systems and processes. This will provide the purchaser with all the information they require to run the business, and more importantly, shows that processes have been thought through. Compile a comprehensive list of plant, fittings and equipment that is part of the saleThis is a good time to look at age, condition and effectiveness. Buyers will be checking to see if items need to be replaced. Having a service warranty and schedule would be helpful; or even an expert report on their state of repair or effectiveness. Customer satisfactionHave you done a customer satisfaction survey? If you haven’t then as a bare minimum, obtain testimonials from happy customers. P L A N N I N G C H E C K L I S T
Ensure that all government and council or other requirements relating to the business are complied with. Ensure that all licences and other permits under which the business is run are current and renewable. Carry out a search of your company on the Personal Property Securities Register to ensure there is nothing outstanding. The purchaser will require that any security over any assets included in the sale be removed before settlement Ensure that you perform your obligations under your lease. Can the lease on your business premises be assigned? Will an assignment trigger a rent review? What is the earthquake rating on your business premises Get your customer database up to dateFormalise and document any verbal agreements or contracts. Identify likely purchasers of your business - Are there any businesses buying up and consolidating businesses of your type? Other obligations Get an estimate of stock value and sell or dispose of any obsolete assets and stock that are not essential to the running of the business The original lease documents in respect of business premises should be present and available for inspection. Check employment contracts of employees of the business and their entitlements. Identify key staff who may need to be retained after the business is sold. Seek professional help - Your accountant can assist with valuing the business and can help you identify potential changes you can make to increase the value. Your lawyer can check any lease or employment contract issues and ensure the sale is documented correctly. P L A N N I N G C H E C K L I S T
A clear and accurate description of what the business does. Demonstrate where the business is currently Opportunities for the future Executive summary Ownership and history - background of the business, and the reasons for the sale. Management organisation and control Staffing structure Product / service positioning Premises, facilities and lease details Competitors and customers - only disclosed if not sensitive Nature of operations - information on products, divisions, market share, research and development, accounting policies and major suppliers. Marketing, including social media, software use. Financial performance including the profit and loss accounts for the past 3 years Financial outlook including cashflow forecast SWOT analysis and business plan Detailed breakdown of tangible and intangible assets An information memorandum sets out all the relevant information about your business so that a prospective purchaser can appraise the opportunity that your business presents. It should be comprehensive and accurate, reflecting an honest picture of the business. A professionally prepared information memorandum (IM) is a strong marketing tool in the sale of the business and provides transparency to the purchaser. The business brokers at McDonald Real Estate will help you prepare this IM. The information Memorandum should show: - This will typically include: Following a Confidentiality Agreement being signed, further information will be released including: I N F O R M A T I O N M E M O R A N D U M
Some of the marketing/advertising options that are available to promote your business or property could include the following: 1. Promotion on the following websites: www.eieio.co.nz www.realestate.co.nz www.nzbizbuysell.co.nz www.trademe.co.nz www.businessesforsale.com 2. Email out to our business buyer database 3. Digital marketing on Stuff media 4. Facebook and LinkedIn promoted posts 5. Daily News - Commercial & Industrial Section 6. Property Press 7. Stratford Press 8. South Taranaki Star. We will review the options with you and tailor a package that best suits your business. There are a number of combinations that we can discuss that will give you the best exposure locally, nationally and internationally. M A R K E T I N G O P T I O N S
Russell Atkinson M:027 452 5544 O: 06 757 3083 E: russell.atkinson@eieio.co.nz M A K E C O N T A C T Kevin Hight M: 021 746 371 O: 06 757 3083 E: kevin.hight@eieio.co.nz Find us on Facebook and LinkedIn to keep up to date with the latest listings and information. Our Commercial Team is dedicated to help you in this process, contact our Team to receive the support and experience in selling your Business.
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