Sell your Business E-Book Extract Part 8 – Preparing to Sell

Posted on Sep 17, 2015

Research shows that when asked what processes they would be willing to put in place in order to maximise the value of the business, 60 per cent mentioned document processes, 53 per cent mentioned upgrading relevant technology, but only 38 per cent would restructure the business, 36 per cent would spend three to five years preparing for a sale and 26 per cent would put on more staff.

 

Brand Issues

A powerful recognisable brand increases goodwill. The most common mistake that small businesses make is to name the business after the owner. Usually this reduces the attractiveness of the brand to a potential purchaser, as it flags the fact that the business is reliant on the original owner.

Prior to going to market, an entrepreneur must look at the business name and product names, making sure that the brand appeals and will not limit the business to a segment that in the future may become obsolete.

When it comes time to selling a business, it can be restrictive if the name of the business is linked to a geographical area.  This makes it hard for a buyer to move to another location or open multiple outlets in other locations.

Expense Reduction

Prospective purchasers will be interested in the income earning ability of the business. Before a business is put up for sale, vendors can seek to increase the income by increasing trading hours, expanding the sales team, or by reducing expenses.

Sellers should analyse their expenses and see if savings can be made.  One of the biggest expenses for any small business is salaries and wages, and eliminating even one employee’s wages can make a significant improvement to the bottom line.  Lowering commissions can also reduce a wages bill, but this can have a negative effect on the morale of sales people, so this needs to be weighed up against possible savings.

Other areas where savings can be made are telephones and IT, motor vehicle expenses, inventory management, quotes and tender systems and cost of goods

Government Grants

An instant way to improve profit is to apply for a government grant. There might be a state or federal government grant that will provide assistance to a business and facilitate its immediate growth and profitability.

An example of two grants that small businesses could be entitled to are an Export Market Development Grant (EMDG) or a Research and Development Grant.

An EMDG is an Austrade grant that reimburses up to 50% of expenses incurred on eligible export promotional activities less the first $15,000.

R & D Tax Concession is a broad-based market driven tax concession, which allows companies to deduct up to 125% of qualifying expenditure incurred on R & D activities when lodging their tax return.  AusIndustry administers these grants.

Vendors should get a list of all government grants and see if any are applicable for their business. There are specialist consultants, who work on a commission only basis, to help companies apply for grants.

Revenue Drivers

Before going to market, a business owner should see if the company’s profitability could be improved by increasing the average value sale.  Some of the KPIs that a business owner should be aware of are the average value sales, the frequency of purchase, the number of customers and leads and the conversion rate.

To improve these KPIs, some sales script training can increase the conversion rate or even the number of leads that are coming into the business.

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