3 Questions to Ask Before Selling a Business

PESTLEanalysis Team
PESTLEanalysis Team
Table of Contents
Table of Contents

Selling business is a lot more than just a financial transaction. Instead, it can be quite a life-changing experience. Lloyds business brokers in Melbourne can help smoothen the transaction for you.

Lloyds business brokers in Melbourne
Business brokers in Melbourne

Selling business is a lot more than just a financial transaction. Instead, it can be quite a life-changing experience. 

It takes a lot of time, planning, and talent to sell a business. Typically, the planning part comes first because no matter how much talent you hire or how much time you have, if you have planned correctly, the seller will be able to leave money on the table. Of course, the vice versa would mean that the business wouldn’t sell at all. 

A lot of mainstream market businesses, as well as some niche businesses don’t sell. There are a couple of reasons why this happens and the most notable reason for this is poor representation, crummy books, or the price itself. 

As Lloyds Business Brokers in Melbourne, it is our responsibility to make sure that your business is priced optimally. It is also our job to support our marketing efforts with the highest qualities of presentation. 

Planning to Sell a Business?

Preparing your business for sale is a diverse task but is only half of the planning process. The other half is to prepare the seller to make a sale and this part is often ignored. The more thorough your planning is, the more likely you are to see a successful conclusion in the engagement. 

To help business owners prepare for the sale, we have compiled a few questions that they can ask themselves. More specifically, these are the questions that brokers should ask sellers:

What Are Your Post-Sale Plans?

As we mentioned in the beginning of this post, selling a business can be a life-altering event. Most business owners are just not prepared enough emotionally for the aftermath of the transaction. Most human beings, and especially business owners, expect to be productive - even if this productivity entails going fishing or cooking dinner. There have been too many instances where business sellers thought that they would be able to soar off into an early retirement but quickly became bored of their newly-discovered free time. 

You see these individuals went from working 50 to 60 hours every week with very busy to-do lists and calendars to having absolutely nothing to do and no one to speak to or no questions to answer. Most of the people they know may still be working and the majority of them will belong to the industry they just left. 

When a business seller contacts us, we mostly ask them about their plan post-closing and what they expect to do after the sale. Most of these questions usually come from personal experience and those people who retire to no activities often regret their decision.

How Much Is Your Business Worth and Will This Valuation Be Able to Afford Your Answer in the Previous Question?

Business owners should know what their business is worth before settling for the decision to sell. You see, an owner can’t just throw a number out there and just say that this is what I’m looking for. Nobody cares about this figure besides the owner. 

A common reason why these businesses don’t sell is because the price is too high. Value and price are two very different things and business owners should determine the value of the business before deciding on the price. However, even before they establish a price, we need to ask owners whether this value is enough to finance their retirement, or whatever they were looking for in question #1.

Are You Planning on Hiring the Right Talent?

Selling businesses is nothing like selling a home. For starters, while selling businesses, confidentiality is of vital importance. This is one fact that instantly eliminates the majority of real estate agents as one of the possible representatives. 

The talent business owners specifically need can be determined by considering the answer to question #2. You see, every business needs to be professionally valued which is why professional business brokers are trained to provide a valuation or certified and trained business appraisers will need to be part of your team. 

Taxes are also guaranteed to have an impact on how much a business seller gets to walk away with. For this reason, a CPA that specializes in planning tax is also very important. To determine whether the cost the appraiser or broker arrives at is enough, you should hire a Certified Financial Planner. Naturally, if this number isn’t enough your team will have to do some rethinking. 

In addition, you will need a transaction attorney to do all the cleaning up as opposed to a speeding ticket or divorce attorney. But before all of this, a professional business broker will help you find the right buyers. 

Will You Be Willing to Stay Involved With the Business?

Depending on the nature and size of your business, there is often room for the seller to stay on for a predetermined period of time that usually lasts up to one or two years. Such transactions are usually structured as earn-outs where sellers receive approximately 75% of the price of acquisition at closing or the balance from the earn-out period which is assuming that businesses perform as required. The larger the business, the more likely a buyer will include this in the deal. 

Final Thoughts

As a professional broker, it is our responsibility to remember that every business owner that is considering to sell is about to embark on a journey on which they are completely lost. They need guidance so they can understand all the pitfalls of a deal and how they can avoid them. It is our job to help them understand what should be done so that they have the best chance of making the most of this journey. 

With perfect preparation, the chances of success will be more significant.

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