As a business broker I have the privilege of assessing hundreds of different businesses from a variety of different industries. One of the most common things that I come across is a situation where the business is often NOT ready for sale. Sure, the business owner is doing well, and in their mind they are thinking “why shouldn’t my business sell?” – There are several reasons why a business needs to be “prepared” for sale.
Let’s look at what the most common issues are that halt or stall a sale
1.The lease… if a lease has minimal tenure left, or there is no option period on the lease it can be a problem. In the mind of most Sellers this seems perfectly ok, and in some instances I have witnessed well-established businesses operating on a month to month basis where the relationship between Seller and Landlord seems to be ok. That’s all very well for the Seller, but in the mind of the Buyer this can throw up a host of issues. Such as, the Buyer’s financiers not lending money on a short term lease with minimal tenure, or on a month to month basis as there is no security. Buyers wonder “will the landlord extend the lease?”, will the landlord throw me out?, at who’s cost?, will there be any changes and increases to the lease agreement if it is extended, what will the terms be?, will the landlord require a bank guarantee? And on it goes….These ‘unknowns’ must be eliminated to give the buyer confidence.
2.The Stock… in many cases I come across businesses that do not complete an official stock take, so the stock value is a “guesstimate”. As the Seller has been trading over the years the stock has slowly increased and so when the time comes to assess the stock for a business sale, we find that the business is either over stocked, there’s old stock, out of date stock, devalued stock etc. The stock value is a big consideration to a Buyer as this can affect their working capital needs, and in some states of Australia there is a Government Stamp Duty to be paid on stock when purchasing a business.
3.The Financials…more than ever since the GFC days Buyers, their Accountants and Financiers are requesting or insisting upon viewing the full “up-todate” completed financials. I have come across Sellers who are reluctant to have their current end-of-year financials completed as they are not required to complete them until the following year, and this will save them spending money now. Again, this is going to slow down the sale.
A great way to resolve issues quickly that could potentially stall a sale is to engage a professional Business Broker to conduct what we call “A Health Check” on the business. At Benchmark we have a great tool available to Sellers called “12 Tips to Selling your Business”. This document has been developed by professional Business Brokers to assist Sellers to work as a “team” with their appointed Business Broker, to present the business for sale at its optimum level of performance, and presentation.
BROKERS TIP: Prior to a Seller engaging the services of a Business Broker (and the Brokerage Company) check these points out first. Meet with your Broker (face to face), and if possible go to their place of business (Head Office), why? Ask yourself, do you feel comfortable with the company? Do you feel you can work with your Broker you’ve engaged to do the job? We encourage Sellers to “interview us” first, as the Business Broker and Seller must get on together to achieve the best possible outcome. – and to properly prepare for a sale.
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Ian Salter started with Benchmark Business & Commercial Sales in 2005, as a “general” business broker. In 2010 Ian was responsible for establishing the specialist ‘Franchise Sales Division’ of Benchmark, where he is the team leader. This role sees Ian managing and mentoring a sales team of specialist franchise brokers.
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