The Importance of Being Sale Ready
Do you own a business but haven’t given much thought to selling? Well brace yourself! Your business should always be managed if hypothetically, it was going to be sold tomorrow. It is unfortunate but in today’s environment you never know what’s around the corner. Too often I meet with business owners who are not ready to sell but due to unforeseen circumstances, are forced to. You might ask if you are not ready to sell, why should your business be in sale ready condition? It’s simple – it will cost you financially if it’s not.
There are two reasons to always operate your business as if you are ready to sell:
- It will ensure you continue to operate the business at its peak with an emphasis on profits (and not on minimising profitability and therefore your tax liability)
- If you do need to sell – it is almost always too late to engage the changes required to bring the business up to ‘sale ready’
Profitability and business value generally go hand in hand. Do you want to maximise the sale price of your business when you sell? If so, what would happen if your personal situation changed overnight and you had to sell your business? Would your business be ready for sale? For example, have you maximised your business profit? Are all procedures and policies in place and what is your role within the business? Are you integral to the business?
If your business is not sale ready and your priority changes, you may not have time to fix the issues to maximise your sale proceeds. Preparing a business for sale (or improving the current operation) may take up to 24 or even 36 months. It is therefore important to actively maintain focus on both the financial and non financial aspects of your business.
Whether or not you are ready to sell today, it is good practice to continually operate your business with a view of selling. If nothing else it will ensure you generate solid financial returns in short to medium term with an excellent capital gain on sale.