Business owners looking to divest must 'commit to the process' and make the necessary changes to ensure the best sale outcome according to Marcus Salouk, Director of Queensland based consultancy Scancorp.
Mr Salouk said the most common mistake made by small and medium business owners was treating their business like a residential property for sale.
"Owners of privately held businesses often go about divesting in the same way they would sell their house," he said.
Mr Salouk identified the large privately held business sector as offering unique challenges.
"With less complexity, very small businesses can generally be acquired with lower levels of analysis and due diligence. Larger businesses especially public companies have higher levels of governance transparency. It's the companies in that middle ground of around $3M to $30M enterprise value that require the most preparation prior to divestment."
"A small business is an alternative asset class and is purchased based on its performance and strategic fit.
"Business owners shouldn't expect buyers to just wander through the business until they receive an acceptable offer. The successful sale of a business requires significant preparation and analysis."
Mr Salouk said business owners had to commit to the sale process.
"In the lead up to a business sale we often find that businesses need to undergo significant changes to better prepare them for market."
"For a small business owner who has run a commercially successful business for many years the idea that they must modify their business systems for sale can be difficult to accept, but this is sometimes vital to ensure the best result. In some cases we're approached by owners who are keen to sell immediately but whose business is not yet in shape to market. We work with them to establish a strategy to make the changes required to optimize the value of their business."
Mr Salouk said having a strong business plan and transparent systems were also crucial elements to achieving strong sale value.
"Business owners need to prepare updated and accurate financial records and undertake a complete audit of all assets. It's also important to properly systemise the business by documenting all key processes."
"These measures ensure quality and efficiency and assist greatly in the transition of the business to the new owner, which increases the overall value of the business.
"I also recommend succession planning strategies be put in place prior to entering into the business sale process as buyers are often reluctant to take on a business that relies on the knowledge of just one individual."
Scancorp - business sale tips
1. Commit yourself to the sale process
2. Understand the valuation methodologies and accept that changes may need to be made to your business systems to maximize business value
3. Make sure your business plans and financial records are updated and in order
4. Ensure your key business processes are documented
5. Ensure key intellectual property is not held by just one person
6. Consider a broad range of divestment strategies such as earn-outs, syndicated sales and private equity leverage buy-out structures
Scancorp is located at Level 1, 163 Wharf Street Spring Hill, Brisbane. Phone (07) 3902 2400 or visit www.scancorp.com.au.
To interview Marcus Salouk please contact Joseph Keller at Ignite PR & Marketing on 07 3368 1650 or Joseph@ignitepr.com.au