The time has come to exit my business, but how do I best sell my business?
There are several options when it comes to selling a business. It’s important when deciding the best path to keep in mind your financial and non-financial goals. After all you want the best possible return and outcome for your business, in order to maximise the investment you have made over the years.
Selling your business privately will often provide the best return, especially if there is a strategic reason for someone purchasing your business. It pays to ensure the buyer is genuine and committed to going through with the purchase. Watch for competitors disguised as ‘buyers’. They may just use the opportunity for gathering valuable knowledge on your business systems and your client base. Once you have ascertained the prospective buyer is genuine, you need to reassure yourself the buyer has the appropriate business skills, courage and finances necessary to buy your business. You may elect to use the services of a business broker, or list it for sale yourself. In some cases the seller may leave money in the business, so will have a vested interest in the business surviving and prospering under the new ownership. Many businesses end up being sold to external buyers by going to the market - be it through online websites like nzbizbuysell.co.nz, business brokers or word of mouth.
If you sell your business to another company (maybe a competitor or a similar business), you may be able to get your price and walk away with no further financial ties to the business. If it’s a new business buyer, then there are likely to be more questions on how it works, and a transition period to learn the ropes. These options will require a more involved ‘due diligence’ process before the sale goes through. If it’s a corporate buyer, they may want the owner to remain on a contract basis to embed the business. This type of sale also often requires the owner to sign a ‘restraint of trade’ agreement.
Selling your business to a business partner, manager or to your employees has a number of advantages. After all, these people know your business and that is likely to make the transition easier and quicker. It is unlikely you will be required to prepare the same level of documentation that might be required for an external buyer. A management buyout is more likely to result in stability for the existing staff and business, and it is unlikely you will be required to stay on for a transitional period. This leaves you free to move on with your life quickly. In some cases you may be asked to leave some money in the business.
Passing on or selling your business to a family member is more about succession planning and having a sufficiently interested, motivated and capable family member that is suitable. They must be enthusiastic, willing and, importantly, be able to take over your business. It pays to have a formal process in place to prevent any misunderstandings or family issues. This ensures transparency and encourages open discussion.
Whether you have only owned your business for a short time, or have had it many years, it pays to have a business exit strategy in place to ensure you get the best outcome when it’s time to sell your business. If, for some reason, you have very little to sell, your options may be limited to just closing or liquidating your business. When considering closing or selling a business, it is important to get professional advice.
With the proper knowledge, advice and preparation, you will greatly improve your success when selling your key asset - your business.