Now what do I do, do I accept the offer to buy my business?
Over the years, many clients have sought our help as a competitor or customer comes knocking wanting to buy them out. Sometimes the offer comes out of the blue other times its been on the cards but has now come to fruition.
For the small business owner, it is both flattering and scary at the same time! For some its ego-building and others shrug it off. My first advice to clients is don’t get distracted from running your business as if it doesn’t eventuate you are left still running your show and sometimes the distraction can cost you significantly.
There are several things you need to do before getting to the deep negotiation stage and here is our list of things to consider
Are they genuine?
In business, not everyone has good intentions. It may be a competitor that be looking for information about you rather than genuinely want to acquire you. Understand their intentions from day one when they want to buy your business.
Get them to sign a confidentiality agreement!
Do your homework on them?
Check them out. Do you think the purchasers are reputable and could you see your customers happy if you sold out? Are they ethical and are they your way of thinking? Alternatively, do you don’t care as long as pay you what it is worth? Check ABN look up and see how long they have been operating.
Please show me the money!
Understand in the early part of negotiation what the deal really is and how it will be financed. It’s nice to know someone wants to buy my business but does the deal stack up. As example , one of our clients last year received a great offer to sell, but the term of repayment was over five years. There was too much risk involved, so they walked away. Sometimes a purchaser initially will suggest an amount, but then as negotiations take place there are many contingencies, buts and earn-out agreements to be negotiated.
Sometimes what you think will be a great offer is often not really what you thought or subject too certain expectations that you will do for the new owner. This is a good reason why dont get too distracted from you business operations!
Are you ready to sell?
When an offer comes out of the blue, you may not be ready to sell or the business still has a lot of unrealised potentials. Selling out too early is not always a good strategy unless the offer is fantastic.
Sometimes your industry is peaked and maybe its time to sell? Sit down and evaluate where you are at!
What will you do post-sale?
Many realise that selling out won’t always mean they live happily ever after. Think about the financial impact of the sale, what you will do post the deal. How will the tax play out on the sale? Will continue working as an employee for the new owner. What does your family think about selling out?
This is what we at Gartly Advisory do to help you manage these and other issues that arise when a business sale takes place. There is always a strategy behind the sale of any business? Determining whats the right price to sell and how it impacts on your retirement strategy all come into play. A strategy plan is s best done years out so that when an offer comes you are ready; the business will be in a better position with systems, sales and profit to sell as a desirable purchase.
In many cases, you will only sell your business once. Make it a sale that fits your strategy.
Get excited that someone has approached you but then take the time to negotiate for what’s right for you. If you are not ready then politely tell offeror that maybe soon but not just yet. Gently keeping them on the hook allows you to keep the dialogue open but exit a business on your terms
Of course, there will be occasions where a buyer will present you with an offer you can’t refuse
This offer may a good enough reason to accept and sell your business. These offers are usually priced way above the market value of your business but are rare. This kind of offer is a one-off, and you may not want to let it slip away it up because you may not get another one like it
An offer to buy is not only flattering but also let you know that your business is a marketable and sellable enterprise – that’s exciting !
To get any offer to sell your business is a fantastic opportunity. Take that opportunity and play the game, known when to hold it, fold it and best of all enjoy the journey.