The business-buying-decision is heavily biased towards perception of risk as well as understanding the benefits of a business. This means that you must help buyers understand the real risks in your business – you must try to minimise their fear of the unknown. The more they understand the real business risks the easier it is for them to appreciate the benefits.
The benefits for buyers are not only financial. Benefits may include personal success, independence, or self-fulfillment. They are looking for a particular type and size of business that fits their needs, skills and experience as well as their future plans.
A buyer will be concerned about a range of issues. They may be concerned that goodwill and intellectual property are linked to the owner and won’t transfer after a sale – or perhaps the business has a bad reputation in the market. The buyer may perceive the cost of acquiring goodwill as too high.
Then there are human resources issues: what if there is a large turnover in staff after the sale; what if the managers leave; what are the staff’s long service leave, superannuation and workers compensation liabilities.
Xcllusive uses a model to explain how the two opposing thoughts compete. The overemphasis on risk due to the fear of the unknown creates mistrust. The feelings of mistrust dominate the buyers understanding of the business and their desire to achieve its benefits.
Over the sale period we seek to reduce the buyers’ mistrust and increase their understanding of the benefits. This should help them to make a balanced decision to buy your business.
In contents of the business transaction, Due Diligence (DD) is a term used for an investigation or audit of a potential business that a purchaser is looking to invest in.
Due diligence serves to confirm to a purchaser all material facts in regards to a business. Due Diligence is always done before entering in the agreement for the purchase of the business. Its purpose is to prevent unnecessary harm to all parties involved in the transaction, especially the purchaser.
The facts verified during DD process will vary for different types of businesses. The most common areas of concern are financial, legal and compliance. It is common to use specialist outside adviser for each of specific areas of due diligence.
The cost and timing of DD will depend on the complexity and size of the business being investigated. If any anomalies or undisclosed facts are discovered through the DD process, the purchaser will ether attempt to re-negotiate the price or decide not to proceed with the business purchase.
In a recently undertaken survey of 100 businesses that have been offered for sale by business owners 2 years prior to our survey, of those businesses participating in the survey that were sold, we have found that the average time it took to sell the business was 8.6 months. The advertised price range of the businesses that sold was between 45K and 790K.The data collected has reviled that 47% of the businesses were sold within 6 months, another 35% between 6 months and 1 year and 18% of the businesses took over 1 year to secure the sale.
The following are points that you should pay attention to in order to reduce the time it takes to sell your business.
- Make sure that your business is priced right and not overpriced
- Present your business to buyers transparently
- Have all paperwork and financial records ready for inspection
- Address all issues and uncertainty prior to putting or your business on the market
- Be co-operative and make it easy for buyers to inspect your business
A good business agency or a broker can make the business selling process not only shorter but also help you achieve a sale result that you will be happy with.