John Denton on Getting Businesses Ready For Sale

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

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  • Legal entity, ownership, business names versus trading names (often out of date)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  • Systems and procedures (often totally absent, out of date or incomplete)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!”

For The Record – Mentoring Group Testimonial

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Testimonial From Louise Evans owner of Evans Modelling

“I am having a fantastic time with the Mentoring group.

Yes, I found everyone a little quiet but I assumed it was because (like me) they were all knuckling down on their own business and implementing the valuable tools we are learning.

The changes in my business and also personal life so far are largely due to the information and knowledge I receive from SBC Mentoring.

I treat each session as re grouping and re analyzing the direction I am headed in.

I look forward to the remaining sessions of this Mentoring session and the advanced mentoring to come.

I am having a fantastic time with the Mentoring group.”

For information on the mentoring groups click on the WORKSHOP PROGRAMS tab at the top of the page or contact me via the CONTACT US tab.

Testimonial On The Sale Of A Business

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From Chris and Eva Godwin – December 2009

I tried a very well known company in Perth to sell my business.  After one interview and a look at some basic figures they said; “it wasn’t worth anything and they weren’t interested”.  After picking myself up I started asking around and was recommended to John Denton of Performance Business Sales.  What a breath of fresh air that was.

John and PBS weren’t interested in the figures in the beginning, they were interested in the business and the owners, then the figures.  The process was professional, honest and respectful and the final sale price of the business was fair and reasonable.  Due to the businesses specialised nature it took 12 months to sell.  John stuck by us (husband and wife directors) to the end and this may sound a little strange, but I actually enjoyed the process as it taught me so much.

My family (me, the misses and 2 kids under 10) our now living in Germany for one year (2010) before returning to Australia and if I decide to buy or sell another business again it will be through John and PBS.  To whoever reads this testimonial; “If you want to sell your business, stop mucking around and use John of PBS.  You want regret it; I didn’t”.

Contact details supplied. Chris and Eva are happy to be contacted.

And They Wonder Why They Have Problems ….

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Hi Again,

I can’t believe it is so long since my last article. Things have really taken off since the new financial year started (1st July for the non Aussie readers) in that we are now finally getting genuine business buyers in the market place who are prepared to make realistic and acceptable offers. This is resulting in deals being done and businesses changing hands!

Yeah! We say. But it doesn’t come without some frustrations. One of the most common frustrations is people’s lack of “attention to detail”. In Australia we are famous for the “She’ll be right, mate!” attitude. Unfortunately, when it come to legal contracts and the exchange of large sums of money if  “She ain’t quite right mate!” then it can end up costing someone a lot of money, time and stress. And none of us need any more of that.

An example is the legal entity of the seller’s business and the buyer’s business. It’s one of the first questions I ask people. And they tell me it is, e.g.  XYZ Pty Ltd. It gets put on to the paperwork and the owner signs the Authority To Act, for example. In spite of repeated questions it turns out later, at a critical time, that there are multiple directors and some don’t want to sell. Or, there is a “trust” involved and the Pty Ltd is a trustee for the trust.This can cause all kinds of complications down the track.

Another trick that gets pulled on us is the incorrect spelling of business names. Over a period of time the owner forgets that they registered XYZ (W.A.) Pty Ltd and not just XYZ Pty Ltd or something along those lines. When I pull them up for it they ask “Well isn’t that close enough?” to which I always answer “If you are one digit out dialing a telephone number, does it really matter?”

Of course it matters!!! And then settlement of the deal gets delayed and people get angry and frustrated and start looking for people to blame. No matter how much as brokers we strive to get the correct information and detail, we are usually at the mercy of the owner’s memory (apart from certain things which can be searched on government databases) – which has often faded with time!

TIP: Always check what you are writing on forms BEFORE you fill it in. And the old adage “NEVER ASSUME” – please!

Next article to be posted will be “Read the damn documents BEFORE you sign!)

P.S. Check out my upcoming workshops in Perth – next one is October 23rd – go to Workshops tab for info.

Regards
John Denton
“Helping business owners achieve their life goals through buying and selling businesses!”

GST And The Sale Of A Business

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I was asked today the very good question “Does the sale price of a business include GST and is GST payable?”

(For the non Australian readers, GST is our Goods and Services Tax (10%) collectable by the vendor or service provider on most things – there are exceptions but not worth going in to here.)

The answers are “No” and “No” – if the business is sold as a “going concern.”

The sale of a business as a going concern is GST free if:

  • everything for the business’ continued operation is supplied to the buyer
  • the seller carries on the business until the day it is sold
  • the buyer is registered or required to be registered for GST
  • the sale is for payment
  • before the sale, the buyer and seller agree in writing that the sale is of a going concern.

Example: Selling a business

You are registered for GST and you sell your florist business. The sale includes the shop, delivery vehicle, stock, equipment and all the other things necessary to continue operating the business. You continue to operate the business until the buyer takes over, the buyer is registered for GST, and you and the buyer have agreed in writing that the sale is of a going concern. This is a GST-free sale.
Always consult your accountant for a definite ruling on the sale of your specific business!

Learn about this and a lot more at my next half day workshop CLICK HERE for details.

Regards

John Denton
Committed to helping business owners realise their life’s goals through buying and selling businesses







  • everything for the business’ continued operation is supplied to the buyer
  • the seller carries on the business until the day it is sold
  • the buyer is registered or required to be registered for GST
  • the sale is for payment
  • before the sale, the buyer and seller agree in writing that the sale is of a going concern.

Example: Selling a business

You are registered for GST and you sell your florist business. The sale includes the shop, delivery vehicle, stock, equipment and all the other things necessary to continue operating the business. You continue to operate the business until the buyer takes over, the buyer is registered for GST, and you and the buyer have agreed in writing that the sale is of a going concern. This is a GST-free sale.

Do You Treat Your Business Like A Farm or a School?

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Well, come on, honestly, do you treat you business like a farm or a school?

Well known author, stephen Covey, develops an excellent metaphor around “cramming” (school) and “farming” (farm). He says that for long term benefit or to give things longevity then they need to be treated like a farm. For example, business relationships or  relationships of any kind, need to be treated like farming if you want them to be successful over time. By farming he means you need to be working on them all the time. Nurturing, developing and looking after them – long term.

On the other end of the scale you have what happens in schools and particular colleges and universities where students often leave everything until the last minute
and then cram for an exam. This gets he student a certificate but NOT an education, according to Covey. To become educated takes time – in otherwords, it’s farming.

What does this have to do with business, you ask? No, I’m not geting in to selling farms and schools!

To build a business “ready for sale” requires farming! It is a long term exercise if you want to sell for the best possible price and quickly and easily. Many aspects of a business which affect its value and saleability need to have a track record of consistency over a longish period of time. Usually a minimum of three years. A good track record of growth and profitability over a period of time are paramount – just to mention one aspect.

As I am committed to helping business owners realise their dreams through buying and selling businesses I am running some half day workshops on “The 7 Key Steps To Preparing A Business Ready Sale”. If you are interested in attending a workshop, or know someone who would like to attend just CLICK HERE for the details. If there isn’t a workshop in your area, just use the CONTACT US tab on the web site to request one! When there is enough demand I’m willing to go anywhere (well almost!).

Until the next time – remember, treat your business like “farming” and not a “school” – and like a well run farm it wil sustain you for a very long time.

Until the next post!

Regards
John

I’m not really against franchising – it just seems that way!

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From previous posts you may get the impression I am against franchising – I’m not.

Buying a franchise can be a great stepping stone from being an employee to becoming an independent business owner. The upsides of buying a franchise (provided it is a good franchise) should be;

  • you get a ‘turn key business’ with systems and processes already done for you
  • you get a quality product or service ‘done for you’
  • you get training in all aspects of the business, sales & marketing, service and product or service
  • the franchise should have a track record of success ( check it out first)
  • in Australia the very strict Code Of Conduct for franchisors protects franchisees
  • you have a ready made recognisable brand
  • the franchisor should be doing marketing and lead generation for you
  • it “should be” a relatively low risk investment

    • There are other positives too, but you need to do your homework BEFORE committing to the purchase.

    Whenever I am asked for advice on buying a franchise business I always say “Find out how you are going to get out of it.”

    Why would I say that? Because I see so many people ‘trapped’ in a franchise which is very difficult to sell and unable to be sold at a price that will recover the initial costs of the franchise. As a business broker I get approached by many franchisees who want out and want to sell and when I appraise the business they are horrified at how little it is really worth. A situation often made worse by franchisors who have totally unrealistic ideas on what their franchises are worth when being sold on.

    There I go again – being negative!

    Seriously, the original concept of a franchise was that it was simply a license to operate a business for a predetermined period of time.

    You don’t actually own a business. You have to make your money while operating the business – not when you sell it. As an independent business owner, you can do both. Make good money while operating the business AND when you sell it.

    Remember, if buying a franchise – virgin or pre-owned – find out how you can get out of it and talk to people who have been there and done that. There are good and bad franchises just as there are good and bad business in any industry.

    That’s it for this post – let me have your comments, questions etc.

    P.S. I was a franchisee for 9 1/2 years and sold at a good price! It can be done.

    Why We Do The Hard Work Upfront

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    Hi Readers,

    Last week I was reminded why at PBS we do all the hard work with the business seller “up front”. You see
    I had a conversation with a young man who came to me as a ‘buyer’. I, and some of my colleagues,
    showed him a number of businesses. Then, as sometimes happens, it all went quiet and no purchase was
    made.

    Some weeks later I received a call from someone wanting me to sell their business for them. It turned out
    the young man I had been helping had referred this person to me as a reputable broker he should use.
    When I rang the young man (buyer) to thank him I asked how he had gone with buying a business.

    It turns out he had gone to a different business broking firm and had put an offer in on one of their business
    for sale. After spending time and ’emotion’ going through the purchase, it all fell apart in due diligence
    because of problems in the financials. The young man put in another offer through that same broking
    company only to have this second deal fall through as well.

    What this highlighted for me was the strength of our process at PBS and how it protects both the buyer
    and seller and minimises the chance of the deal falling through. We get the seller to provide us a lot of information about their business, including finalised accounts, UP FRONT before we do the appraisal. If
    things don’t stack up, we don’t take the listing. If we do take the listing, then the next step is the business report and this is such a strict process that all strengths and weaknesses of the business are uncovered
    and documented.

    By doing the hard work upfront we make it a more successful, lower risk and less stressful process for
    both parties.

    I thank that young man for reminding why we do the things we do.
    Bye for now!

    Whoooosh – What was that?

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    Whooooosh

    Me: “Hell, what was that?”

    The Universe: “That was your life!”

    Me: “Bugger! That went quick. Can I have another one?”

    The Universe: “Sorry. No. That’s all you get!”

    Do you ever feel like life is rushing away from you? Well me too. I can’t believe that 2008 is almost over already. Things have changed so much since I last posted to this blog. Some notable changes in the business sales environment.

    1. The values of most businesses are falling.
    2. Business owners have inflated views of what their businesses are worth. They haven’t  kept up with what’s going on.
    3. Vendor finance of buyers is becoming increasingly common as credit to buy businesses  becomes harder to get.
    4. It’s a buyer’s market and they are negotiating harder and taking longer to make a  decision
    5. Most of the businesses coming on to the market are ‘unsaleable’.
    6. Not many good businesses are coming on to the market
    7. There are more buyers out there than sellers

    So what should you do if you want to sell your business?

    Get a reputable broker or registered valuer to tell you what the market value of your business is. Then get help to work on your business and prepare it for sale. Watch the economy and external factors and time your run to the market carefully. More soon….

    If you want help with anything to do with putting a value on your business to preparing your business ready for sale, just contact us via the Contact Us tab on this web site! Alternatively, post a comment to this blog post. You WILL get a reply.

    Regards

    John


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