John Denton on Getting Businesses Ready For Sale

A business that's 'ready for sale' is well worth keeping!

Buy A Business – What You Need To Know

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business ready for sale checklistWhen I am asked to help a buyer who is looking at buying a business, the meeting is usually me asking a long series of questions. Many of the questions end up being questions which the buyer should be asking the seller in relation to the business and their reason for selling.

At the end of the meeting with the buyer, they  will often say “Thank you, now I know what I need to know and what questions I should ask”. Then I sit and wonder why they hadn’t thought of these seemingly obvious questions before. But of course, if you haven’t been through the process of buying a business before – then you don’t necessarily know what you need to know!

It’s all about asking the right questions to get the right information to be able to make the right decision FOR YOU! The trick is knowing what information you need!

There are some basic areas that you need to explore as a potential buyer and therefore areas as a seller which you need to have covered. These are;

(1) Why is the seller selling? (Especially when they are telling you what an excellent business it is.)
(2) Financial aspects of the business. The seller should be able to provide you with ‘year to date’ figures and finalised accounts to the end of the last financial year. If they can’t why not?
(3) How much should I spend on a business? It’s not just about price but also working capital etc.
(4) Non financial aspects of the business. Just a few of the things are lease arrangements, staffing, systems, barriers to entry, seller hand over period, seller not competing…  and many more,.
(5) Questions to ask yourself. Why do I want to own a business and why this one? Just for starters.

If you are thinking of buying a business then plan and prepare before you even start looking.

Buying a business is a major decision for most people. Unlike buying a home, where if you end up not liking it you can always sell it again and get something for your money. If you buy a business and it all goes pear shaped, you could end up with nothing to sell and lose everything – including your home! Don’t take the chance! Seek good advice before proceeding – CLICK HERE.

Having said all that, if you buy the right business for you and for all the right reasons it could be the best investment you ever made!

All the best in your decision making – John Denton

Do You Have A Business, A Practice Or A Hobby?

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Business Owners: Are You Building Something To Sell?

Or do you have practice or a hobby?

Many people tell me that they have a business and want to sell. In reality after asking some pointed questions, it often turns out that they have a practice or are simply “self employed”.

So what’s the difference? Putting it simply, a practice is based around an expert (practitioner / tradesperson) and a business is based upon systems! A business can be though of as a commercial, profitable enterprise that runs without the business owner having to be there. A business can be sold but a practice can’t.

So do you have a business to sell or a practice / hobby? The acid test is “Can you go away for three months holiday and the business still runs without you?” Many business owners build their business around them and make themselves indispensable. This means that not only is the business ‘unsaleable’ but also that the owner cannot take holidays or have a life as well as a business. Typically the business owner is always “on call” for the business either to customer demands or staff if there are any. It doesn’t need to be like this.

Contact me for help to turn your practice or business into a saleable asset – a business that you can sell at the best price, quickly and easily, any time you want to.

I work with business owners on a one on one mentoring arrangement or in business owner mentoring groups that I have been facilitating since 2008. For more on what I do you can go to THE BUSINESS GROWTH PROCESS

If you would like to just have an informal chat then please BOOK A TIME TO CHAT

5 Common Myths About Selling A Business!

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business tready for saleThe biggest frustration for me helping business owners turn their business in to a saleable asset is the beliefs business owners develop around selling their business.

Very often these beliefs are etched in to their minds by well meaning accountants, bookkeepers, business coaches, friends and the media.

If you want the real facts about having a business that’s ready for sale ….

Attend my half day workshop on the ‘7 steps to turning a business in to a saleable asset’ and preparing it ‘ready for sale!’ Click the button to get more details and to register!

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What are those common beliefs and mistakes owners make?

(1) I’ve had my business for 30 years and my accountant says it must be worth a $million
WRONG! Whilst longevity is a factor it doesn’t affect the market value very much. It may help to make it more attractive to a buyer and therefore easier to sell. On the other hand it can also be a negative if the business hasn’t kept up to date!

(2) My accountant says my business is worth 5 times earnings before interest, tax, depreciation and amortization (EBITDA)!
WRONG! With the best will in the world, very few accountants are able to put a market value on a business. Why not? Because they are not out there in the market place day after day selling businesses. Also, there is no set multiplier (properly called an ROI factor) or ‘rule of thumb’ for different types of business. Yes, the adjusted net profit (sort of EBITDA) is one part of it, but the the risk to that profit determines the ROI factor (multiplier). This is explained in detail in my half day workshop with lots of real examples.

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(3) It’s a waste of money engaging a broker or lawyer and using a sale agreement. I’ll just write something up with the buyer.

WRONG! You most definitely need a good business broker or lawyer involved to protect both parties and avoid litigation after the sale. Dollars invested now can save you a fortune and a lot of problems post sale.

(4) My business is a simple one. As long as the buyer offers me the asking price that’s all I need to agree.
WRONG! There are numerous things that need to be discussed and agreed at the offer stage. Then everything needs to be in the buy / sell agreement before both parties sign. Failure to do this thoroughly can end up in litigation after the sale.

(5) That’s it, we’ve signed the sale agreement so I can slow down now and book my flights to Bali!
WRONG! The seller has an obligation to the buyer to keep running the business as they always have until settlement. Many sales fall through because of things which come out in due diligence! Sometimes the buyer will not get finance. It’s not over until the money is in the bank! If you let the business slow down and then end up keeping it …….

This is just a very small list of the things that need to be dealt with when selling a business. 

How can you avoid making these mistakes and sell your business in the shortest time, for the least hassle and for the most dollars?

Start by attending my next half day workshop on preparing a business ready for sale!

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I am a business ready for sale coach and business broker and dedicated to helping business owners prepare their businesses “ready for sale” – whether you want to sell or not, because a business that’s ready for sale is well worth keeping!

I tried to sell a business privately and failed because I made all the mistakes! Then I learned the correct way from one of the best brokers in Australia. Since then I have operated as a business ready for sale coach and part time business broker  All of that learning and experience is the value add that I can bring to you!

John Denton

What Previous Clients Have Said….

“A few years before I wanted to sell my business, I attended John’s “Prepare Your Business Ready For Sale” course and this was extremely beneficial. I discovered that selling a business was a lot more complicated than I expected. After the course John worked with me as my coach to prepare my company for sale over an 18 month period. When the time came to list I was fully prepared and achieved a very satisfying result. I cannot thank John and members of his BOB group enough for the support and guidance. – Nolan Penning, Former Owner of Magnum Essence

“When it comes time to make big decisions, to bounce ideas off people or have a focus group on a new product, that’s when it can feel very lonely for a lot of small business people. That is where I have found John Denton’s mentoring / business owners board (bob) groups to be invaluable assistance.” – Gary Maynard, Owner – Medichill

You Can’t Change History!

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As much as we would like to sometimes, we just cannot change history.

Although, some business owners still try to turn the clock back!

What do I mean by that? Well, every day in business we are creating a history of the business’ performance – reflected in the numbers. Every single thing that happens in the business is there for everyone to see – including potential buyers of the business. And that’s why I keep emphasising to business owners “be aware of the history you are creating. Know your numbers!”

One of my mantras is “Keep your financials clean, up to date and the ‘right’ numbers going up!”

A business, like shares, is much more attractive when there is a history of the numbers going up! The most important numbers are ‘adjusted net profit’ to the owner, turnover, and gross profit. The longer they have been going up the better but at least over the last three years. Steady growth is preferred by most buyers not sudden increases or decreases. Consistency is very important and spread over a good diverse mix of clients. It can take years to get to this state.

One bad number can make a big difference in the value of a business and can put buyers off – big time! Many businesses I get to look at simply do not have a well constructed process for recording and reviewing the numbers. Want to know more? Attend one of my short workshops.

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This is why every business owner who has any ambition at all to sell their business one day, and cash out with a good sale, needs to be planning and preparing their business ready for sale EVERY DAY. Build an asset not just a job for the owner.

A business that is ready for sale will be much easier to manage, run without the owner, be much more successful and will attract buyers. This is the situation you want to be in so that you can have options to sell for the price you want, when you want to. You should be in control of the whole process.

There are many more areas that need to be considered in addition to the numbers. For example how well you structure and record the numbers is also critical. Make it easy for a buyer (and yourself) to see what is happening in the business. Keep your eye on the ball all the time.

In future posts I’ll be covering the other areas but if you want to fast track your learning on the “business ready for sale front” consider attending one of my half day seminars on the topic. To get the details

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The Ups and Downs Of Franchising

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Fr“If I could get out of my franchise …”

It happened again recently! I was talking to a franchisee about her chances of selling her franchise business and she came out with the statement I hear so often from franchisees – “If I could just get out of my franchise for what it cost me to get in to it, then I would be happy”.

I hear this so often from franchisees struggling to make a profit in their business. Often they are in a retail situation in a shopping centre. After a few years they realise that the only people making any money are the shopping centre owners and the franchisors. In effect, the franchisee is working to keep the shopping centre owners and franchisors in the lifestyle they have come to expect!

Thinking of buying or selling a franchise business then BOOK A CHAT with me.

Unfortunately, once you are IN and have invested the money, it can be very difficult to get out and recover your costs. If the lease is in the franchisee’s name then you are stuck with that as well. If the lease is in the franchisor’s name, which it often is these days, then the franchisor may be able to terminate your franchise agreement for not meeting targets, put a manager in to the store to keep it running and protect the brand and then recruit a replacement franchisee to take over. The franchisor and their brand are well protected.

Look, I am not against franchises! There are some excellent franchise businesses out their and most franchisors will do the right thing by their franchisees! My point is though that people need to have their eyes open when considering a franchise and understand what they are getting in to.

When you get in to a franchise – new or established;

(1) You are not buying a business! You are signing up to an agreement to operate a business for a ‘term’. That means that you effectively have a license to operate one of the franchisor’s businesses for a period of time (the ‘term’).

(2) There is no guarantee that your agreement will be renewed at the end of the ‘term’ or that you will be able to sell the business. READ THE AGREEMENT AND GET LEGAL ADVICE! Know what will happen at the end of the ‘term’ and what your options will be.

(3) No matter how well you build the business over the ‘term’ the client base (goodwill) belongs to the franchisor.

So, I always say “Find out how are you going to get out of it before you get in to it.”

As I said above, there are some very good franchise operations in Australia and we have such a strict Code of Conduct for Franchisors – as part of the Trade Practices Act – there is no excuse for a prospective franchisee NOT having their eyes open before they sign up.

Always speak to existing franchisees and see how they are going, and if possible, franchisees who have left the franchise. Under the Act the franchisor must provide details in their disclosure document for you to do this.

To view a Guide To The Franchising Code of Conduct for franchisees CLICK HERE

Thinking of buying or selling a business, of any kind, then BOOK A CHAT with me.

All the best in your business,  John

“Helping business owners prepare their business ‘ready for sale’ because a business which is ready for sale is well worth keeping!”

The Most Dangerous Number In Business Is

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number_one_800_clr_9875ONE

One of anything!

The numbers in a business are the instrument panel by which an owner should run his business. It still amazes me how many business owners I talk to have no idea and no interest in their numbers – until it is too late! That’s why there are many businesses out there with too many ONE’s in the business. Let’s look at just some of the areas of a business where ONE is a risk. If you have any of these ONE’s in your business, ask yourself “How can I reduce my risk?”

Learn about this and more in my next short workshop. More Info & Register

  • ONE major client. Even with contracts in place there are many ways you can lose the client and if you do then your business is likely to fail. Any client / customer that is greater than 15% of your revenue is a risk and reduces the value of your business.
  • ONE supplier. Again, even with contracts in place risk is real. The supplier could go out of business or cancel the contract. A supplier can find another outlet for their product or come in to your market and go direct. It happens!
  • ONE key ‘expert’. What happens if the ‘expert’ leaves the business, suffers ill-health or is poached by a competitor?
  • ONE key employee. Some businesses rely on one key person (or owner) to do everything. All the knowledge is “in their head” and that is a major risk. This is the case with “practices” that are based upon an expert. Remember, a good business is based upon systems, not an expert.
  • ONE product or service can become a problem. If that product or service goes out of date, is made redundant by a superior product or gets copied (e.g. video hire, photographic processing etc.) or people buy cheaper over the internet or from overseas suppliers, then you are in trouble. You need to innovate all the time to stay ahead of the competition.
  • ONE computer system / database with all the business records on, can be very high risk. Yes, I’m sure you do backups – but when was the last time you tested your ‘disaster recovery process? How long before you would be back up and running?

In this age of rapid change, disruption and increased competition, if you are not innovating and evolving faster than the market you are in, you could go out of business. Aim to make your product or service redundant before the competition do. (An old Sony maxim, I’m told). Look out for trends.

Finally, is your business model going out of date and you haven’t realised it yet? For help with all of these things, attend my next workshop on HOW TO TURN YOUR BUSINESS IN TO A VALUABLE AND SALEABLE ASSET – CLICK HERE FOR DETAILS

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I could go on but I’m sure you have got the message.

I’ve used the word ‘risk’ a lot and that’s because it IS risky having ONE’s in your business.

So what do you do about it? Well the starting point is to conduct periodic “risk analysis” assessments. It doesn’t need to be onerous and is best done on a continuous basis. At your regular management or team meetings, take different parts of the business each month (or period) and brainstorm the risks with your team. It often improves the process if you have an external business consultant or coach involved in these sessions because they are not too close to the business, or emotionally attached to it, they will ask better, probing questions.

When you have identified the risks, categorise them by using the LIKELIHOOD / IMPACT process. Assess how likely things are to occur and then assess the possible impact on the business. For most businesses it is sufficient to score IMPACT and LIKLEIHOOD as HIGH, MEDIUM or LOW. Then prioritise the risks starting with the ones which scored HIGH on both LIKLIEHOOD and IMPACT. Now brainstorm ways to mitigate the risk.

As they say – forewarned is forearmed!

As well as assessing the ONE risks, think of trends and external risks, such as the falling Australian Dollar, rising unemployment, the downturn in the mining, resources and manufacturing sectors and things like government legislation.

If you need any help with risk analysis or anything else in your business, just get in contact with us through the CONTACT US tab or attend my next workshop on HOW TO TURN YOUR BUSINESS IN TO A VALUABLE AND SALEABLE ASSET – CLICK HERE FOR DETAILS

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Is Your Business ‘Ready For Sale’?

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business ready for sale checklistAt some point every business owner exits their business!

Will YOU exit with equity and have your biggest pay-day ever? 

Do you have a ‘business ready for sale’ checklist for your business?

(O.K. I’ll cut to the chase – I run half day workshops in Perth on getting your business in to a ‘ready for sale’ state. Click the button for details)

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Don’t wait until you are forced to sell by circumstances and only get a low return for all the blood, sweat, tears and time you have invested in the business? Or worse still, close the business down.

The simple truth is that if you haven’t got all your ducks lined up in your business before you put it on the market then you are likely to be very disappointed with the outcome when trying to sell your business. And I say ‘trying’ because in the current business sales market you have to have all your ducks lined up to sell a business.

Buyers are buying businesses but they are doing much greater due diligence than they did years ago. There are a lot more businesses for sale than there are buyers. This means that buyers can be much more selective about the business they buy.

If you want your business to stand out, sell quickly and get the maximum sell price, then make sure that everything is very well prepared and ‘ready for sale’ BEFORE going to the market.

The other benefit of getting your ducks lined up is that (as I keep saying) a sell a businessbusiness that’s ‘ready for sale’ is well worth keeping. Build your business as if you are going to keep it forever, but could sell it tomorrow.

“So” you ask, “what are these damn ducks you keep talking about?”

The ‘ducks’ are basically a checklist of things to have ready! Areas I cover in my “Preparing a Business Ready For Sale” half day workshop, include;

  • Legal entity, ownership, business names versus trading names (often out of date)
  • Financials and accounting (obvious, but often a major headache at appraisal time!)
  • Systems and procedures (often totally absent, out of date or incomplete)
  • Customer records and databases (much of the goodwill is in this area)
  • Sales and marketing – systems and records (absolutely crucial and often non-existent!)
  • Suppliers (done on a handshake – may not be good enough)
  • HR and employment (a mystery area to many business owners)
  • Premises (can be a minefield)
  • Reason for sale (may be obvious to you but a buyer will see it differently)
  • Other – the business needs to be assessed through the eyes of a buyer…..

Obviously I can’t cover all of these in detail here, however I cover ‘getting your ducks lined up’ in my half day workshops. To find out about my next workshop;

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Learning from the many mistakes I see business owners make in my role as a business broker puts me in a great position to help other business owners to prepare their business ‘ready for sale’ and avoid the same mistakes. My 10 years running my training and development business has prepared me to deliver that learning to business owners. Please check out my services on this website and contact me if I can be of help.

Once again, to learn about ‘getting your ducks line up’ – click the button to get details of my next half day workshop!

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“Helping business owners prepare their business ‘ready for sale’ – and selling them!”

Preparing A Business For Sale – A Legal Perspective

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By Helen Kay of Rise Legal

It is important to be well prepared and organised well in advance of putting your business on the market for sale. This will not only avoid costly delays but could also maximise the value of your business.

Helen Kay from Commercial Law firm Rise Legal has provided some tips to assist you in preparing to sell your business….

Be clear on exactly what you are selling

If the business is being sold, you should prepare a detailed schedule of all the plant and equipment and furniture, etc. that is included in the sale as well as a separate schedule of what is excluded.

You must let the buyer know which (if any) of the plant and equipment is subject to hire purchase agreement or equipment lease, etc. If you are unsure, your lawyer can conduct a search for you at the Personal Properties Securities Register.

You should be one step ahead in contacting the relevant companies and obtaining discharge certificates or arranging for the transfer of the hire purchase agreements, etc.

Formalise any important contracts

If your business is reliant upon certain key suppliers, customers or employees you should make sure (where possible) that formal written agreements are in place before the sale as this could enhance the value of your business to a prospective buyer:

  • convert any verbal agreements into written agreements as soon as possible; and
  • review any existing contracts with suppliers and customers to ensure they are still current and can be easily assigned to the buyer.

Get your lease in order

  • If you lease your business premises it is important to review your current leasehold arrangements and determine:
  • How long is left to run on your lease – If your lease has expired and you are holding over, or if there is only a short period left to run, you may consider negotiating a new lease or an extension with your landlord.
  • What the assignment conditions require – Your landlord could be entitled to withhold their consent to the assignment of lease if these conditions are not satisfied, so it is important to be aware what they are and what the landlord can ask for.

This is just a snap shot of some of the things you should think about getting organised prior to sale.

(Please note that this article has been provided for information purposes only and does not constitute legal advice.)

For further information or for your FREE SELLER’S CHECKLIST please contact Helen Kay at Rise legal. Contact Helen via www.riselegal.com.au

RiseLogo With extensive experience in assisting her commercial clients buying and selling business, Rise Legal’s Managing director, Helen Kay, will be happy to assist.

Liability limited by a scheme approved under Professional Standards Legislation

For more general information on preparing your business ready for sale and increasing its value, see John Denton’s half day seminars by clicking Seminars & Workshops

End Of Year – An Opportunity To Plan

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UpGraph

If you fail to plan, you plan to fail!

Are you planning for growth?

When is the best time to plan? NOW!

It’s almost the end of another financial year – well at least it is in Australia. The end of the year is a good opportunity for reviewing your business performance over the last year as well as setting strategies, goals and plans for the coming year.

One of the opportunities which is often overlooked, is the opportunity to restructure your chart of accounts in your accounting package. Why would you want to do that?

Your management accounts are your ‘instrument panel’ for the business. They should be set up to provide you, the business owner, with the information you need to make informed decisions in your business. Correctly set up, your accounts will tell you; what are your most profitable products and services, who are your most profitable clients, the life time value of your clients, where your cash is going and where you can increase your profits – just to mention a few.

When preparing your business “ready for sale” the profit and loss statements are crucial. Make sure you identify different income streams – not just “Sales” or “Income”. Break it down in to logical product or service lines. Track your cost of sales in the same way. Accounting packages these days allow you to assign product codes and associate costs to ‘project codes’. Make good use of the powerful features of the accounting package. Seek help from a good accountant and if you don’t know one, just give me a call.

When it comes to selling the business, it makes it much easier to put a value on the business if you separate out items which can become add-backs. That is, such things as owner’s wages and super, subscriptions and memberships and anything which is discretionary and not part of the day to day operations. It also makes it much more attractive to a buyer and improves the likelihood of getting through due diligence quickly and painlessly.

“You should build your business as if you are going to keep it forever, but could sell it tomorrow!”

I run half day sessions on “preparing businesses ready for sale and increasing their value”.

Just click WORKSHOP for dates and details.

All the best

John Denton
“Helping business owners realise their dreams through buying and selling businesses!”.

Myths Of What Makes A Great Business

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GreatByChoiceWhat makes companies great in tough times?

In their book “Great By Choice” Jim Collins and Morten Hansen dispel a number of entrenched myths about what makes companies great in tough times.

I have been sharing these ‘entrenched myths’ with people on my LinkedIn page and other social media to collect their comments. What do you think about them? Please add your comment below!

Entrenched myth #1: Successful leaders in a turbulent world are bold, risk-seeking visionaries. Contrary finding: The best leaders we studied did not have a visionary ability to predict the future. They observed what worked, figured out why it worked, and built upon proven foundations. They were not more risk taking, more bold, more visionary, and more creative than the comparisons. They were more disciplined, more empirical, and more paranoid.

Entrenched myth #2: Innovation distinguishes successful companies in a fast-moving, uncertain, and chaotic world. Contrary finding: To our surprise, no. Yes, the successful cases innovated, a lot. But the evidence does not support the premise that successful companies will necessarily be more innovative than their less successful comparisons; and in some surprise cases, the 10X cases were less innovative. Innovation by itself turns out not to be the trump card we expected; more important is the ability to scale innovation, to blend creativity with discipline.

Entrenched myth #3: A threat-filled world favors the speedy; you’re either the quick or the dead. Contrary finding: The idea that leading in a “fast world” always requires “fast decisions” and “fast action”—and that we should embrace an overall ethos of “Fast! Fast! Fast!”—is a good way to get killed. 10X leaders figure out when to go fast, and when not to.

Entrenched myth #4: Radical change on the outside requires radical change on the inside. Contrary finding: The 10X cases changed less in reaction to their changing world than the comparison cases. Just because your environment is rocked by dramatic change does not mean that you should inflict radical change upon yourself.

Entrenched myth #5: Great enterprises with 10X success have a lot more good luck. Contrary finding: The 10X companies did not generally have more luck than the comparisons. Both sets had luck—lots of luck, both good and bad—in comparable amounts. The critical question is not whether you’ll have luck, but what you do with the luck that you get.

Would love to know your thoughts and experiences – please leave a comment below! Thank you!

Collins, Jim – Great by Choice: Uncertainty, Chaos and Luck – Why Some Thrive Despite Them All

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