Why a good ‘Sales Memorandum’ will help you sell your business quicker. (Also, what is a Sales Memorandum?)

One document can make all the difference in selling your business.

The Sales Memorandum isn’t just a mere formality; it is the first vital point of formal information exchange between buyer and seller, that if done right can propel your business sale jumps ahead.

(if done poorly, it has the exact opposite effect)

So, here it is; What is a Sales Memorandum and Why you need a Sales Memorandum:

What is a Sales Memorandum?

To put it dryly, the ‘Sales Memorandum’ is a roughly 20-page document that details your business’s operations, covering everything from your basic functions through to financial figures. It is given to your prospective business buyers, not immediately after they have enquired, but after they have signed a confidentiality agreement. This is because the document may contain sensitive information about your business that you don’t want to just ‘give out’.

When a buyer has filled out the confidentiality agreement the Sales Memorandum is the very next thing that you need to send them.

(NOTE: speak to your solicitor about creating a good confidentiality agreement)

Why do you need a Sales Memorandum?

The document itself is not an ‘advertisement’ for your business. It needs to be an un-biased information source for potential buyers that allows them to understand your business from the inside out. So why do you need it? Here’s why:

The current buyer’s market is at its height of caution at the moment and it’s not that hard to see why. When a buyer visits a business classifieds site they need to sift through countless businesses, some of which perform exactly as advertised… and some of which do not. The issue that buyers face is that the only way to tell the difference between a good business and a ‘bad’ business is to spend long hours in due diligence- often only to find out that the business they’re looking at is nothing like the business that was advertised.

This is why buyers are so uncertain, and it’s also the precise reason why you need a Sales Memorandum; to assist in overcoming this uncertainty. If you overcome this uncertainty you can

  • accelerate the buying process,
  • gain an advantage over other businesses on the market that don’t have a memorandum
  • and Encourage more buyers to proceed from the enquiry stage.

All of this can add up to a quicker sale and with a bit of luck- a higher selling price.

The thing is, the only way to truly do this is to objectively show your business- warts and all.

Why warts and all? Think about it like a used car sale.

You don’t want your Sales Memorandum to play the part of the used car salesman who does nothing but talks up your car. Business buyers don’t trust that guy. Instead, you want your Sales Memorandum to play the part of a trustworthy third party vehicle inspection that shows the good with the bad. By you disclosing the good with the bad in an unbiased way, your potential buyers will feel more comfortable trusting that what they’re reading is true. If they can trust what they’re reading then their uncertainty is lessened and they will be able to make an informed decision about whether or not to pursue the sale.

Quick List: How do you write a Sales Memorandum?

To describe exactly how to write a Sales Memorandum would far exceed the scope of this blog. So we’ll keep it short. Try to cover the following:

(pssst. You can skip the list if you aren’t writing one today)

  • Conditions of Acceptance
  • The Proposed Transaction
  • Information regarding this offering

(note: these first three are important and you should seek assistance in preparing them)

  • Profile, Description and Brief History of the Business
  • Description of the Market and the Customers
  • Product, Sales and Pricing
  • Specific Trends
  • Suppliers
  • Advertising and Sales
  • Real Estate
  • Shop Fixtures, Fittings and Software
  • Training and Introduction
  • Guarantee
  • Financial Highlights
  • Employees and Wages
  • Skills and Licenses Required
  • Current Issues
  • Strengths of the Business
  • Reasons for Sale
  • Sale Price
  • Summary of Investment Considerations
  • a List of Documents available for review

 

Now, this list offers a framework from which to start, but keep in mind that some of these items might not apply to your business, nor will they encompass everything that you’ll need to include. Try to cover what is important for your business, and remember, try keep it objective and keep the ‘sales’ speak to a minimum.

To recap, through reducing the uncertainty for buyers, a good Sales memorandum can

  • accelerate the buying process,
  • help you gain an advantage over other businesses on the market that don’t have a memorandum
  • and encourage more buyers to proceed from the enquiry stage.

And once again, all of this can add up to a quicker sale and with a bit of luck- a higher selling price. So if you’re thinking of selling, any time spent making your Sales Memorandum as good as possible is NOT time wasted.

To talk to one of our agents today about selling your business and preparing your own sales memorandum, click here to fill in an enquiry or simply call us on (02) 9817 3331.

 

By Zoran Sarabaca

Principal of Xcllusive Business Sales
Sell your business with Certainty.

DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice. 

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Why high stock levels are a problem when selling a business (and what to do about it)

If your business requires a lot of expensive stock to run you may have a problem to overcome when you sell. Even if this doesn’t describe your position, it’s an interesting issue that gives you an insight into the buyers’ market, so read on….

Why is high stock value a problem when selling a business?

It all stems from how businesses are actually priced. Businesses are priced on a multiple of usually between one and three times yearly profits. This range can vary greatly depending on where the market is and the risks involved in the business, but let’s say for argument’s sake that an average business will fetch three times profit on the market. This represents a problem for businesses with high stock levels.

To illustrate this problem, let’s use two similar examples.

This is Sam.

 Sam’s business returns a profit of $300,000 p/a after owner’s wages. He has good financial documents and a relatively safe income stream, so his business is valued on three times earnings.

Sam’s Business with $300,000 profit at three times earnings = $900,000 asking price.

 

This is Jennifer.

Jennifer’s business also returns $300k profit after owner’s wages. It’s also a safe business and has all financial documentation meaning that it is also valued on three times profits. The only difference between Sam and Jennifer’s business is that Jennifer’s business also has about $600,000 worth of stock that will need to be sold with the business.

Jennifer’s Business with $300,000 profit at three times earnings = $900,000 + $600,000 stock. Which means that Jennifer will need to ask for $1,500,000 asking price. 

But will she get it? Unfortunately not… and here’s why.

When a buyer is searching for a business, they will search for the greatest return on their investment. When faced with a choice between Sam’s business and Jennifer’s business this is what they’ll see:

You can see why Jennifer, with her high stock levels now has a problem. On the market, despite her business being almost identical, it is not going be nearly as attractive as Sam’s and it is very likely that she will struggle to find a buyer without significantly dropping her price.

Does this mean that stock has no value in a business sale?

Not exactly. Stock definitely has value, but on the business sales market, the substantial increase in initial investment means that it’s value can actually impede your business sale and make your business unattractive to the market.

So how could Jennifer solve this problem? There are three ways. She could:

  1. Reduce the investment by working down her stock levels to essential stock only. This will work for some businesses, however, if your business needs very high stock levels to run, then this first option isn’t an option at all. It also still means that the business will still need to go onto the market at a higher price than non stock-heavy businesses, so it may not quite solve the problem anyway.
  2. Sell the stock to the buyer on consignment. Jennifer could offer terms whereby an incoming vendor could buy the stock as they sell it on consignment. For the buyer, this would allow them to enter the business at a much lower initial investment cost, and for Jennifer it would allow her to sell her business with the stock at full price- only the stock values would take much longer to be returned.
  3. Offer vendor finance on the stock to remove her buyer’s concerns about high initial investment. This would allow the business to be marketed at as close to $900,000 as possible (it’s core value) and the stock be paid for in full ($600,000) over a set, negotiated period of time. Some discount to the business value may have to applied due to the cost of vendor finance if any. This may be preferable to consignment as it would remove the risk of stock not ever selling and it sets in place a timeframe for the return.

These three options, particularly the consignment and vendor finance options, would allow Jennifer’s business to compete on a level playing field with Sam’s or any other business on the market whilst still getting a full return on her stock value, or near enough to.

So, if you find yourself in Jennifer’s position, take heart- there are plenty of solutions to your problem (even if you didn’t know you had one). Speak to your solicitor about how to structure a consignment or vendor finance deal on your stock and advertise it as part of the business sale. And of course, if you need any advice or assistance on how to sell your business, please call us on (02) 9817 3331 or submit an enquiry by clicking here.

We look forward to hearing from you and good luck with your business sale!

By Zoran Sarabaca

Principal of Xcllusive Business Brokers
Sell your business with Certainty.

DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.

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Why you NEED to understand the buyer’s process if you want to sell your business: an insight into the buyer’s mind.

Understanding how business buyers make their final buying decision is absolutely core to developing a good strategy to get them over the line. Are they actually buying what you’re selling? You may be surprised with the answer…

As a business owner, you may have a very clear idea as to what you’re selling. On the surface you may be selling the fitout, the systems, the location, the lifestyle, the brand or any other number of things. Logically, you’re also of course selling the profits and the turnover. Under the surface you may also be unconsciously selling all your years of hard work building the business.

That’s a lot of stuff to sell in one package.

What a buyer in the current market is actually buying is much simpler…

So what are they buying? You might find yourself jumping straight to higher level concepts such as ‘independence’ or ‘lifestyle’. Though it’s true that those things may attract them during the early enquiry stages, they are not the things that convert an enquirer into the person who actually buys your business. The reason: the business research process. Due Diligence, by its very nature is a highly technical, highly involved research process that by its conclusion, has stripped away the more romantic drivers to purchase in a business buyer. This reduces what a buyer is buying into its simplest form:

A business buyer is buying your business’s future profits for which you can demonstrate that, under predictable circumstances, they can and will be sustained for the next 3 to 5 years.

That may sound like a bit of a dry distillation of the business buying mindset, but the reality is that this sentence contains the two main drivers to purchase:

  1. That you can adequately predict your future profit (by demonstrating your historical profits through financial documentation).
  2. That under foreseeable future scenarios, the business’s future profits are not under threat (by demonstrating how internally secure your business is and how stable your industry/market is)

Of course, things like the fit-out, the lifestyle, the location etc are extremely important, but you could have one of the most wildly attractive and profitable business in the country and not be able to get a single buyer across the line if you can’t demonstrate those two main drivers to purchase.

The point of this blog isn’t to scare you. Not at all. The point of this blog is to remind you to keep this stuff in mind. If you are thinking of selling down the line, always remember what the buyer is actually buying, and take steps to cater for that.

Whether you’re selling today or in three years, here’s what you need to do:

  1. Start preparing your financial documentation:
    (if you’re a long time reader of this blog, you’re probably getting sick of hearing this) 
Financial documents are the basis for any due diligence that a buyer might conduct, and without a solid method of verifying your profits, turnover and financial situation, most serious buyers will simply walk away. To solve this, you could speak to a financial advisor to see what you need, but really; just put yourself in the buyer’s shoes. What would YOU need and want to see if you were making a substantial investment in a business.
  2. Do what you can to reduce or eliminate risks, doubts and uncertainties in your business.
    That’s easier said that done. SO, we’re going to give you a tool with which you can manage this process. It’s a free 12-page system designed to eliminate or offset the negative elements of your business that could cause a buyer to perceive a threat to your profits and stop them from proceeding with the sale. It could make you a LOT of money.

To get your copy of this booklet and to start working towards selling your business at its TRUE value, click the link below to download your FREE booklet.

Do those two things, and you’re on your way to selling your business for its true value.

Thank you for reading and good luck!

By Zoran Sarabaca

Principal of Xcllusive Business Sales
Sell your Business with Certainty

If you would like to speak to someone today about selling your business, or have any questions about your personal circumstances don’t hesitate to call us on (02) 9817 3331 or you can submit an enquiry by clicking here and we’ll get back to you as soon as possible.

DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.

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Five ‘quick’ tips to boost your business’s value before you sell (Part 2)

In the last blog, we had a quick look at why you should ‘Make yourself un-necessary’ and ‘Prepare your financial documents (and be prepared to show them)’. In part two of this article, we look at three more things you can do to boost the value of your business and increase its saleability.

(Click here to read part one if you haven’t already- it’s really good)

(Pssst. Once again, ‘quick’ means quick to read. Some of these tips will take time and energy to do, but will be worth it in the long run)

3. Secure any contracts you can
(Do what you can for your business)

This tip isn’t for everyone, but it includes employment contracts, distribution contracts, supplier contracts, job contracts and anything else you can get somebody to sign up for. Honestly, contracts can be a tricky one. They can seem like a difficult subject to broach with employees, suppliers or clients, and truly, a lot of people won’t be interested in signing one… BUT, the more elements of your business your can secure under contract, the more stable your business becomes when you decide to sell (and the more saleable it becomes).

Start by talking to your suppliers and trying to lock in some good prices. They will usually be happy to sign contracts with you because it also helps their business to do so; this protects your margins. Then, try and contract some clients. Remember, to your suppliers YOU were the client, and if you have something to offer your own clients as part of the contract then you both have something to gain; this protects your profits. And finally staff. If you can secure some of your work force through contract, you can protect your business from being damaged by key staff leaving. In the short term, this actually protects your business whilst you’re there. In the long term it gives potential buyers peace of mind.

These are just three examples of how you can contract elements of your business and they are not the only ways to do it, nor will every one apply to you. Regardless, if there are elements of your business that you can secure by contract, do so to increase the ongoing stability, attractiveness and saleability of your business.



IMPORTANT: Speak to your solicitor about drafting your contracts. Don’t write the contracts yourself.

4. Sort your lease out

(Absolutely MUST have- especially if location is important)

If your business’s location is important to its day-to-day operations (and to its ongoing success), then you must absolutely take steps to negotiate as attractive a lease as possible in regards to both its length and options. Like point three, this one won’t necessarily apply to everyone, nor is there a one size fits all solution. Essentially, when it is time to sell you absolutely cannot have any uncertainty surrounding the lease and terms.

What happens if you really can’t resolve your lease issues? As we said in part one, when you sell your business, you must become a master of risk management. That risk needs to be either resolved or offset by a price reduction. If you can’t resolve a lease issue, then you may need to relocate prior to selling. Yes, it will cost money, but quite simply, it just won’t sell if a buyer sees that they will have to relocate themselves shortly after selling. Even for office based business or businesses where the location isn’t important, moving hurts, and buyers won’t want to do it.

Don’t put it off until just before you sell, talk to your landlord about your long term lease plans. Whether you sell your business or you decide to stay, it will benefit you in either case.

(PS. If you own a business in retail, cafe/restaurant, health/fitness or anything similar, resolving your lease issues is vital to finding a buyer for your business)

5. Make a plan for money you won’t make
(To attract WAY more buyers and charge more)

Here I’m talking about preparing a nice long marketing plan and growth plan that extends well beyond the time you sell your business. You need to develop a plan that will benefit you whilst you still own the business, and that a new owner will continue to benefit from in the future.

But isn’t the business’s future success the future owner’s problem?

Of course it is! BUT, the price for which you sell your business and speed at which you sell it are definitely things that fall under your area of concern. For a buyer, a solid plan to move the business forward represents the difference between buying a well built row boat and the same row boat with a massive 20 horse power outboard motor attached to it. Neither of them will sink, but the speed boat will take the new owner where he wants to get- plus, which one would be worth more to YOU?

This one? Or this one?
(sorry about the dodgy photoshop)

Now, like all the tips in this series, this one is easier said than done. Many business owners would seriously struggle to find the time needed to put together such a plan by themselves, so it may be worth looking at getting some outside help (Someone like Matt Braithwaite-Young who can help you with developing a marketing plan). In the end, a business that goes on the market with an ongoing marketing/business plan represents a premium offering. You don’t have to do it, but it definitely adds to your business’s saleability.

IN CONCLUSION

In the end, most businesses won’t have the time or resources to implement everything, so if you had to choose- do it in this order:

1. Prepare your financial documents (and be prepared to show them) (Absolutely MUST have)
2. Sort our your lease (Absolutely MUST have- especially if location is important for your business)
3. Secure any contracts (Do what you can for your business)
4. Put the business under management and systemise it (To attract WAY more buyers and charge more)
5. Put a marketing system in place (To attract WAY more buyers and charge more)

 

Now, is this list the be-all and end-all of business preparation tips? Absolutely not! There are so many things that you can do before you sell to make your business WAY more attractive to buyers. If you would like to keep learning about how to about boost your business’s value before you sell, click here to sign up to our mailing list and we’ll email you when the next blog is up.

Thanks for reading!

Principal of Xcllusive Business Sales
Sell your business with Certainty

Would you like to talk to someone about Selling a Business? Our team are happy to talk to you about your personal circumstances so if you’d like to know a bit more about selling your business call us on (02) 9817 3331, or fill in an enquiry by clicking here. We look forward to talking to you.


DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.

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Five ‘quick’ tips to boost your business’s value before you sell. (part 1)

One of the biggest concerns for a buyer is how the business will continue to function without you running it. Will it continue as it always has, or will all hell break loose and everything go wrong the second you’re out the door? These things REALLY matter to buyers and whatever you can do to alleviate this concern will absolutely work in your favour when you come to sell. You must become a master of risk management. What follows are five ‘quick’ tips that you can use to boost the value and saleability of your business.

(Ahem. ‘quick’ means quick to read, not necessarily quick to implement. Some of these require some work, but will be worth it to you in the long run)

1. Make yourself un-necessary.
(to attract WAY more buyers and charge more too)

If you left your business tomorrow, how long would it take for it to fall to the ground in a dramatic fiery heap? Trust me, that’s something that buyers have a massive concern about. If the success of the business is wholly tied to you being there, then when you’re not, it’s a perfectly reasonable concern to them that things may go wrong. Imagine you’re Fred Flintstone trying to sell his foot powered car.

The buyers would be worrying that the car might be too heavy to run, or impossible to break in or that turning will be a problem. This is because the car doesn’t run itself- Fred Flintstone runs the car (literally in this case). Without Fred behind the wheel, will the car run at all? This is what buyers are worried about. They’re quite happy to drive the car, but they want to know that the car will work without you. So when it comes to your business, that means implementing systems, training your existing staff to manager positions and if you need to, even hiring new staff. Build your business so that you don’t need to be there for every single day. Change your business…

 …from this… …to this…

The downside to this is that it’s takes a lot of time and energy to turn your business into a Lamborghini (figuratively speaking). But if you can get your business to the point where you can say ‘Under Management’ in your advertisement, the number of prospective buyers will soar (and you can also charge a lot more too).

… Plus, maybe a Lamborghini is a little too lofty for most businesses. The majority of buyers will be truly happy with a car that’s reliable and that does the job.

2. Prepare your financial documents (and be prepared to show them)
(Absolutely MUST have) 

Let’s continue with the the car analogy for a little while longer. When buying a business, there is no trusted ‘mechanic’ that a buyer can take a business to who can tell them if it’s a good business or not. They have to establish that for themselves. So, they conduct ‘due diligence’; they spend their own time and money on investigating the business in order to make a decision about whether to purchase it or not. It is the most important part of their decision making process and it can’t done without seeing your financial documents such as tax returns, profit and loss statements, balance sheet, bookings, forward orders, quotes etc. Here’s why:


Imagine you’re buying the Kingswood Ute in the picture above. You love how it looks, you love how it drives- but then you ask the owner to pop the bonnet so you can look under the hood. The owner says ‘no’ and starts making excuses about why you can’t. Stuff like:

  • I don’t want to let you look under the hood until you pay a deposit
  • The car doesn’t have anything under the hood
  • Oh, sorry, the bonnet doesn’t open
  • You don’t need to look under the bonnet, you can see how well it drives
  • Tell you what, how about I just show you these engine mounts. That should do right?
  • Um, look the engine isn’t ready yet, how about I send it off to my mechanic and I’ll get it to you in a few weeks…

Would YOU trust the owner if they said those things?

For businesses, providing financial documentation (such as tax returns, profit and loss statements, etc) is the equivalent of popping the hood in the above example. If you are unable provide financial books and records, chances are you’ve got a very legitimate reason- but to a buyer, any excuse you give runs the risk of sounding as untrustworthy as any of the reasons above.

So what does that mean for you? Make sure that when you put your business on the market your financial documents are ready. You’re going to want at least one year of well-recorded financials (but in reality most people expect three), they need to be presentable and easy to understand, and above all else, you have to be willing to share them with buyers who have signed a confidentiality agreement.

One more quick tip: don’t stop keeping good records when you go on the market. Keep your financial documentation up to date! If you’re on the market for six months, and you haven’t been keeping up to date over that period, then you’re going to find yourself in a position where you’re missing your most important information.

… Ok, I know the heading said that there were five tips, but we’re already up to about 900 words which is far too long for a blog. SO, make sure to watch this space for Part Two. If you aren’t receiving email updates for these blogs, click here to sign up to our mailing list and we’ll email you when Part 2 comes out.

By Zoran Sarabaca

Principal of Xcllusive Business Sales
Sell your business with Certainty 

Would you like to talk to someone about how to sell YOUR business? Our team are happy to talk to you about your personal circumstances so if you’d like to know a bit more about selling your business call us on (02) 9817 3331, or fill in an enquiry by clicking here. We look forward to talking to you.


DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.

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The Low-Down on Cash Businesses: How the cash economy impacts business value.

For decades our parents and grandparents were buying and selling businesses based on ‘gut feelings’. They bought on how many coffees sold, or kegs sold or packets of cigarettes sold. They valued based on turnover or rules of thumb. They valued based on cash.

Those days are well and truly behind us, and it’s important that you know what’s changed.

Since the Global Financial Crisis of 2007 we live in a very different world. The uncertainties, and in particular the business practices introduced to resolve those uncertainties, have become a part of the business sales market for good. The practice we’re pointing at in this blog is the now absolute necessity for good financials. Quite simply, if you want to get the value from selling your business that you are hoping for, you absolutely need clearly recorded and verifiable figures. This is to satisfy two primary needs.

  1. New consumer protection laws require that clearly recorded and verifiable figures are needed in order to obtain finance.
    As part of the National Consumer Credit Protection Act 2009, providers of credit services are required to meet a range of new ‘responsible lending obligations’. Amongst other things, lenders are required by law to make enquiries about a borrowers financial situation and to take reasonable steps to verify that situation. Technically this has always been the case; it’s just a lot stricter now. For business buyers that means that everything they provide must be verifiable, must be above board and absolutely cannot be based on unreported cash sales. That might sound like it’s their problem, but if you want them to buy your business, it’s your problem.
    (If you want to know more on this, check out the National Consumer Protection Act 2009, Chapter Three, Division Four. Be warned though- it’s not a page turner)
  2. Buyers are considerably more cautious than they used to be- It’s a Buyer’s Market.
    Though we may have weathered the financial storm of the GFC, there are few who can say that we were left unscathed. The biggest change that the business sales market saw was a change in where buyers see business value- and it’s an important distinction. In the past, buyers saw the value in a business as coming from how much money they could make from it. Now, they see value in a business as coming from how much they will make from it in the worst case scenario. In order for the buyer to determine this, they need verifiable historical figures.

What to do if you have a business with a lot of income that is not being banked:
If you want to sell a business with a lot of unrecorded income, there are two ways do it.

One: Start recording and banking immediately and wait a few more years so that you have some historical financials. For many people the thought of doing that 100% might be horrifying, but remember, though the current setup may be excellent for you personally it could render your business close to unsellable at its full asking price- no matter how much money it is actually making. If you don’t want to do this, the other options is…

Two: Reduce your asking price to a figure represented by your recorded income. Again, this may be horrifying to some people, but you have to remember that in selling a business, you are entering a market where un-recorded income is largely ignored. It that tastes a little sour, keep in mind that though you may achieve a lower return from the sale, you have still benefited from this un-recorded income for as long as the business has been running.

What if you have excellently recorded income?
If you own a traditionally cash operated business where you have a long history and everything is recorded and “on the books” then you are in a very good position to sell. Good figures in these industries helps your business stand out and you should sell quickly in the current market for a good price.

If you would like to talk to an agent today and would like to know how to sell a business with your current circumstances call Xcllusive Business Brokers on (02) 9817 3331. We look forward to talking to you about your situation.

By Zoran Sarabaca

Principal of Xcllusive Business Sales
Sell your business with Certainty

 

 

DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.

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The truth about overseas business buyers: What you need to know about ‘overseas buyers’ with ‘deep pockets’.

On the road to selling your business you will likely come face to face with someone claiming that they can sell your business to an overseas buyer for more than it is worth. Despite recent actions taken by the ACCC against unscrupulous vendors (1) making these claims, the myth about overseas buyers continues to plague business sellers.

Advertising overseas will cost as much if not more than it does in Australia and knowing the truth about overseas buyers could save you a lot of wasted money.

So, if you’re thinking of selling your business through a business agency now or at any time down the road, take the time to arm yourself with the myths and facts about overseas buyers.

Myth: Many overseas buyers are willing to pay up to three times what a business is worth.

Fact: If somebody has enough money to pay three times a business’s value you can assume one thing about them: They have a lot of money. There are only a handful of ways to get a lot of money, and most of them revolve around being a savvy investor and/or a good business person, neither of whom would even think about paying three times anything’s value.

Myth: The overseas market is brimming with buyers for the Australian market.

Fact: Though there is a chance of selling to an overseas buyer, unless you are a major international, that chance is insignificantly remote. In fact, one of the sites we use to sell businesses have portals in France, Germany, Hong Kong, Italy, Luxembourg and new Zealand. So technically we advertise businesses for sale in an overseas forum. So why don’t we advertise that we have ‘overseas buyers’? Because the number of overseas buyers is infinitesimally smaller than the number of local buyers and it would be close to unethical to even mention them.

So, knowing what you know now, exactly what percentage of businesses do you think actually sell to overseas buyers? Based on a survey of the Australian Institute of Business Broker’s 353 Members, in the 2012 financial year only 2.6% of businesses were actually sold to overseas buyers or to overseas entities.(2)

In summary, only a tiny, tiny fraction of buyers come from overseas. The ones that do aren’t looking to bankrupt themselves to get a visa, they are good business people and they have the time to be picky. So in short, if anybody tells you they can sell your business for more than its worth to overseas buyers, they’re probably not the business agent for you.

By Zoran Sarabaca

Have you ever been told by an agent that they can sell your business to an overseas buyer? OR have you actually sold your business to an overseas buyer? We’d like to here from you!

To find out more about this topic or if have any questions about business sales make sure you give us a call on (02) 9817 3331 or submit a response or enquiry through the site. We look forward to talking to you.

Disclaimer: The information in this article is intended as information only and should not be taken as professional business advice.

Sources:
(1) http://www.aibb.org.au/press_release.php?Id=23
(2) http://www.aibb.org.au/press_release.php?Id=29

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Here are the three questions you’ll be asked when you sell your business, that if you don’t have the right answer to, could cost you big.

By the time most business owners decide to sell it will be too late to answer these three questions correctly. Considering that they are the first three questions you will be asked as a business seller, and that they are impossible to answer without forethought; getting the answers for them in advance will make your business more desirable, more sellable and yes, should get you more more money for your investment.

So here they are; the three questions that you have to know the answer to before you decide to sell.

  1. Why are you selling your business?
    More often than not, a business gets put on the market as a reaction to something such as the owner’s personal situation changing, the business losing money, industry problems or simply that the owner is tired of it. Under these circumstances, selling your business is a necessity- not a choice, which puts you as the seller on the back-foot in negotiations.
    So it falls to you to know why you’re selling before you want to sell. Quite simply; plan to sell. Telling a buyer that selling was part of your three year business plan, then showing them the plan, is much better than saying ‘I’m over it’.
  2. Can I get a copy of your financials?
    This one’s an easy one. If your answer isn’t a big ‘YES’, then you’re going to be making things very difficult for yourself. Buyers don’t buy without financials any more, banks don’t lend without financials (did they ever?) and to put a nail in the coffin, many business brokers won’t even take you on without financials.
    So in short, make your answer ‘Yes’ by keeping good, up-to-date records. Essentially, make a habit of good record keeping now and your business will be considerably more sellable down the line.
  3. How do you expect the business to perform in the future?
    ‘It has potential’ is not the right answer- but it’s easily the most common. This question is impossible to answer off-the-cuff because it needs forethought. Have your marketing plans ready, have copies of your business’s systems and growth plans. Having these ready is the difference between showing someone your business and selling someone your business. This may sound like a tremendous amount of work, but in reality, when you sell a business you aren’t actually selling how profitable your business is now; you are selling the future profitability of your business- and to sell them that, you need to prove it.
    So, get used to long term-planning and don’t stop when you decide to sell. Planning for profits you personally aren’t going to make might feel pointless but in reality you are making that profit when someone buys your business.

Is that all?

Of course not! There are plenty of questions you’ll get asked when selling your business. We picked these three because they are the three top ones you can plan for today for extra money in the bank when you sell.

Want to know more about selling your business? Call Xcllusive on 02 9817 3331 or click here to submit an enquiry and speak to an expert consultant today- Sell your business with certainty.

By Zoran Sarabaca

Principal Xcllusive Business Sales

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Why rising corporate layoffs meant that now was the best time to launch our new Franchise Broking Service

Just a quick update!
With a cloud of corporate layoffs looming on the horizon it is very, very likely that we are about to see a rise in demand for franchises for sale. The security offered by being part of a franchising model, along with the relatively low entry cost (as compared to starting or buying a business) means that franchising has always been a solid go-to for the recently unemployed departing from corporate and middle management jobs.

With this in mind, Xcllusive have recently launched our new Franchise Broking Service to be headed up by the newest member of the Xcllusive team Frank Sassin. With experience with over 60 different franchise models, we are about to start really pushing our expertise in this field. If all goes to plan, you can expect to see a greater number of franchises on Xcllusive’s businesses for sale page over the coming months.

And of course, we would like to welcome Frank Sassin to the Xcllusive team!

If you know anybody interested in selling their franchise (or if you are interested in selling your franchise) make sure you visit our franchise broking page and leave an enquiry!

By Zoran Sarabaca

Xcllusive Business Sales
Sell your business with Certainty

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How could rises in positivity towards business finance affect the business sales market? Survey Results 1/9/2012

What Xcllusive Says:


Zoran Sarabaca, Pricipal
“This survey shows that the uncertainty in the business salesmarket is still an issue with little more than slight rises or falls in positivity for all questions surveyed.The big surprise came from a 6% rise in positivity towards the ease at which a business purchase can be financed. Unfortunately this rise in positivity still leaves the result at below neutral.Historically any rise in this area has meant that confidence in other areas of the market also will be boosted over time as a result.

This can to be attributed to the simple fact that the easier it is to finance a business purchase, the easier it is to buy a business.

Buyersʼ perceptions of attainability have almost always affected their perceptions of business value. If we continue to see raises in the financial area it could an indicator that the market will improve.

In the meantime, however the market is looking as uncertain as it was in the last survey period and it remains to be seen if this situation will change.”

- Zoran Sarabaca

The Results

Xcllusive survey results

The overall results of the July / August Business Buyer Sentiment Survey indicates that current business buyerʼs confidence in the market is low, with a slight rise since the last survey; two months ago.

There were only minor changes in all areas, as this survey once again found that results in all areas to be either neutral or low.

Question 1, indicating the likelihood of buyers finding a business at this time; saw a slight rise in positivity with 41.2% of respondents returning a positive response and 20.2% of buyers responding negatively.

Question 2, which examined the current market as compared to six months ago, was static with a definitive 53.1% of respondents believing that there has been no change in the market with only 28.4% of respondents reporting that the market appears to have improved.

Question 3, which asked respondents whether or not they believe they should hold off buying a business, returned a fairly even spread of results with 36% responding negatively, 31.6% returning a neutral response and 32.5% responding positively.

Surprisingly, Question 4, which indicates the ease at which a business purchase may be financed, returned the largest overall increase in positivity with a 6% rise. Although 58.8% of respondents still responded negatively, that number is significantly down from the 73.2% of respondents from the last survey period.

We’d love to know what you think too! Take part in the next survey by clicking here. It only takes about a minute!

By Zoran Sarabaca

Xcllusive Business Sales
Sell your business with Certainty

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