Five things to consider when selling your business is this week’s podcast episode.

Selling your business is a major life event and has a lot in common with selling your home. There is an emotional attachment to your business that you built up. Like our homes it has memories and will influence us when we choose our buyer.

In last week's episode we talked about whether you are selling assets or shares, your business valuation and tax.

Now the five things that we need to take on board.

Motivation

Firstly, be clear in your own mind about the reason if you are selling. Getting the right price is as much psychology and negotiation. Are you concerned with what the buyer will do with the business? Once they take it over. Does it matter to you?

Listen to find out more

Serious buyers and time wasters

Secondly, dealing with possible buyers. Just like when you put your home on the market. Lots people are just interested in having a nose round, time wasters who do not have the money. How to deal with that when you are selling your business is good thing to know.

Listen to find out more

Protecting yourself.

Your buyer will wish to look at the inside workings of your business. They will wish to know about your customer base. They will wish to know about your finances. Make sure that you protect yourself and your business.

Listen to find out more

Due diligence

No serious buyer will wish to buy your business without carrying out due diligence. Due diligence is about requires an examination of financial records before entering into a proposed transaction with another party

What does this involve? Weill it includes getting your finances up to date ranges, paperwork in order, operational and customer information.

Listen to find out more

Distractions

Do not ignore your business while you are trying to sell it. It is easy to get distracted and lose focus. Selling your business can be an energy-sapping process. You want to make sure that the business and your team are still going strong.

Listen to find out more

What Next

Five things when selling your business, make yourself comfortable. Sit back and listen

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In This Episode

• Understanding thew importance of seller and buyer motivation
• Know how to spot serious buyers and weed out time wasters
• Why it is important to protect yourself when selling your business
• What is due diligence and being prepared for it
• Developing your own Numbers confidence and decisions
• Take more control of your numbers to help make you money, survive and thrive

Links

https://podcasts.apple.com/podcast/proactiveresolutionss-podcast/id1500471288

https://play.google.com/music/m/I3pvpztpjvjw6yrw2kctmtyckam?t=I_Hate_Numbers

https://open.spotify.com/show/5lKjqgbYaxnIAoTeK0zins

https://www.stitcher.com/podcast/proactiveresolutionss-podcast

https://tunein.com/podcasts/Business–Economics-Podcasts/I-Hate-Numbers-p1298505/

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Selling your business is a major life event. In last week's episode, episode 37, we talked about what you should sell in your business, should you be selling assets or shares. We talked about valuations, and in this week's episode, I want to talk about the steps before we engage with the buyer. So, preparing to sell your business, and there are five things to consider,

call it a checklist if you wish, of what you should do to getting ready for that major event in your life. Now, selling your business is not only a major life event, it very much has a lot in common with selling your home. So, there's an emotional attachment to your business that you built up. And one thing to really establish at the outset is your reasoning for wanting to sell.

Is it a change of direction? Is it you wish to pursue other matters? Is it retirement time? Is it the business has not gone the way that you wish it had, and then therefore you want to get out? So, having that clarity in your mind, having the type of buyer that you might want to engage with, is really going to be important here when it comes to negotiations about not only the money and the value for your business, but who eventually buys your business.

Some of us will be emotionally attached when we sell our homes. You know, it's been our refuge. It's been the place that we've had good memories here, and therefore that will influence us when we decide to choose the buyer. If you're motivated purely just by getting the money and moving on, and you are not that worried about what happens to your home or your business, then that's perfectly cool as well.

Let's crack on with the broadcast. Now, the five things that we need to take on board, the five things that form our checklist, and these are the steps before we sign on the dotted line, before the contracts are exchanged, is about being really clear in your own mind about the reason for your selling, because your buyer will want to know your reasoning, and

actually, getting what you want for your business in terms of the value and the right person is as much psychology and negotiation as it’s in terms of factual numbers being presented. So, have a clear idea what you're looking for in your buyer. Is your emotional attachment to your business such that you are concerned with what the buyer will do with the business once they take it over?

Does it matter to you whether they change the direction completely of the business? Do you have an existing team that will be transferred with a business? So, all those motivations go through your mind, and that's going to form part of your initial screening process. The next thing to consider is when you list your business, when you get those inquiries, make sure not only you do deal with those inquiries promptly,

but you have a mechanism for getting rid of what I call tyre kickers, time wasters, and you all get time wasters. As much when we put our home on the market, we will get a lot of people who are just interested in having a nose around, having a look, and they have no real serious intent of actually buying your home.

You will get the same when you sell your business. Some people will be making inquiries. They may not necessarily have the experience, they don't have the money, and you want to make sure you don't waste your time with those people who aren't really serious in wishing to pursue buying your business. What I would suggest that you do is effectively do have a list of screening questions. So,

talk to them wherever they're located in the world. You can set up a virtual meeting. You can ask them in terms of what their motivation is, what their background experience is. If your industry is particularly specialised, do they bring any skills? Do they have a team? If they lack experience, it doesn't mean they're not serious about that.

But again, it will be a question mark over their seriousness of taking on your business. Do they have the money? That's really a key thing. I would say at the very outset, you need to establish whether your buyer actually has the finances and the cash to actually buy your business. So, asking them to confirm how they're going to raise the money, where they're going to get the money from, all those questions are perfectly legitimate to establish the credibility of the buyer.

Social media is such that you can actually do a bit of evaluation, check out the individuals that are involved. So, that's number one. And what you'll find is, once you've eliminated the time waiters, the tyre kickers, you then can come up with a short list of what I call the serious buyers. When you get to that situation of having your serious buyers, the next thing you need to do is to protect yourself. Your buyer, your potential buyer will have access.

They will wish to look at the inside workings of your business. They will wish to know about your customer base. They will wish to know about your finances. They will wish to know a whole variety of things, and therefore, you need to make sure that you protect yourself. Now, it's not cast-iron guarantee,

but as a bare minimum, you should have an NDA in place, what is called a non-disclosure agreement at the outset. So, when you get to the serious-buyer stage, even before you divulge any information, get your buyer to sign off an NDA. I would recommend that you actually get an expert, a lawyer, solicitor to

put one together for you. There are NDA templates that circulate on the internet, but again, treat it with caution. So, the NDA will not guarantee that somebody will not just take your secrets, will not take the information, they're not on a fishing expedition, but at least you've got legal recourse. An NDA is a very common business practice here, and that allows you to have open conversations, to share information,

and typically the buyer will not be able to use that information for their own purposes. It's purely for the purposes of evaluating your business. So, what we've got so far is being clear in your own mind the reason for your selling, what you are looking for in a buyer, ensuring that you eliminate as far as possible any time wasters, or tyre kickers, as I like to call them.

Protect yourself by way of an NDA. Again, the NDA is a legal-recourse mechanism, so at least that shows some serious purpose behind what you're doing. The last two things to consider is you obviously need to have evaluation, and in last week's episode, episode 37, we covered valuations, the different ways that businesses are valued, and just as a reminder of that, typically the evaluation of your business will be based on a minimum.

What will it get if you had a fire sale? If you liquidated the business tomorrow, got the cash for the assets that you have in your business at market value, paid for the debt, what would be left over? That's your bare minimum. What your buyer is after is access to your marketplace, your customer base,

profits that you may be generating, so there's lots of reasons why the buyer may be interested in you. The final numbers will come down to the strength of the relative negotiation between you and the buyer. The next critical thing, and it's a good housekeeping exercise, nevertheless, is what I call the due diligence.

No serious buyer will wish to buy your business without having some due diligence carried out. So, they will not buy the business purely on your representations, purely on your character, purely on good faith. They will want to verify for themselves exactly what they're purchasing. Typically, due diligence will cover the following.

Make sure that your accounts are up to date. If they're not up to date, that's going to put a question mark over the credibility of your business in the buyer's eyes. If you access cloud accounting, and please check out previous podcasts where we've covered that topic, then that should not be a challenge.

Typically, they will expect to see at least three years worth of financial records and financial accounts. Paperwork. Do you have any licenses? Do you have any legal agreements, HP agreements? Do you have any legal agreements? Do you know where they are? If not, make sure you locate them. They will want to know information about your current staff team, how long they've been with you.

They want to know who they are. Get your house in order. Check if you've got any IP. Do you have the ownership rights of that? Make sure all your strategy records are up to date. Your buyer will want to know more information about your customer base. So, again, names, addresses, what they do, what they're buying.

Any information about marketing. So, they will want to know the whole shooting match here. So, again, just reminding us, that's why the NDA is going to be really important. A lot of business owners will not necessarily be able to access immediately all that documentation, so it's a good opportunity to actually make sure all those records are collated, you know where things are, you know what the legal agreements that you've got in existence.

Have that and have that located somewhere centrally. Again, only divulge that once you've got a serious buyer. You've verified they've got the money to actually buy your business. You've verified that's the type of buyer that you wish to sell to, and that's your choice. It could be purely a money transaction or it could be actually I want this business to continue,

I want to keep my staff team on board, and so it goes on. Lastly, as this can be a very time consuming process, it can be a very-energy sapping process, we want to make sure it's as smooth as possible, and what we need to do is to make sure that as you're going through that process of selling your business, you're not getting distracted too much, and you make sure you keep an eye

and focus on your business itself. Until that business is sold, you have that responsibility, you have that obligation to yourself and your staff team, and your stakeholders, and it's easy to get distracted because it can be an energy-sapping process just focusing on the selling of the business here. So, keep your eye on the ball, don't get distracted, and keep your focus.

That’s enough from me, folks. I hope you found this podcast useful. Hope you found this episode useful. Share it with your friends. Share it with your colleagues. Even share it with the people that you don't necessarily like. So, until next week, goodbye from me. We hope you enjoyed this episode and appreciate you taking the time to listen to the show.

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