Sterling Corporate Finance: How to sell your business
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How to Sell Your Business – New Book By Andrew Rose In the first extract from his forthcoming book, How to Sell Your Business, Andrew Rose, partner with Sterling Corporate Finance, examines the question – when is the right time to exit a business. The key to successfully selling a business is to demonstrate to the purchaser that your business has the potential for growth or has a strategic value. A purchaser is not going to pay a premium for a business that has little growth potential. Worse still, from a prospective purchaser’s perspective, is if the business growth prospects are limited because the business is already operating or manufacturing at capacity. Ask yourself the question: if I was offered this business would it be of interest to me? Understanding industry trends is important. Is the industry in which you operate in a period of sustained growth because of new technologies? Is it in a period of consolidation? Is it a declining industry? If the industry is in a sustained period of growth then corporate acquisition activity will be high as companies are either seeking to enter the market or are seeking to consolidate and strengthen their market position. The key is to be a participant. Don’t wait, you may miss the boat and not get a second chance. The potential of the business is the focus of the selling message but the current and recent trading performance and financial robustness of a business are the cornerstones upon which any potential purchaser will base their valuation. The presentation of growth and development prospects of a business will be credible only if the current performance supports it, otherwise a purchaser will dismiss the arguments as “sales patter”. An example would be if a business has lost turnover in the last year but has now regained replacement business, and turnover is on the increase. Try presenting this scenario to a potential purchaser with say six to nine months trading history to support your case and then try presenting the same argument without any trading history. The former offers credibility to the growth story and provides the purchaser with the comfort that his premium price will look less expensive in a year or two. Many owner managers believe that they should achieve all the growth potential for themselves, or they reach a capacity ceiling, which, if it is to increase, will require significant capital expenditure. At best this will have a detrimental impact on the eventual sale price for the business and at worst could make it unsalable. In next week’s extract from his forthcoming book, How to Sell Your Business, Andrew Rose looks at how to value a business. For more information, or to contact Andrew Rose, visit www.sterlingcf.co.uk More articles in
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