Insight

Optimising the sale of your company

September 2015


We will now look at these steps in a bit more detail.

Setting the asking price

Don't fall into the trap of believing you can wait until you need to sell before you decide to sell. This will be too late. You will need three to five years to plan and complete the sale of your business. This will give you the time to plan and position your business to achieve the highest possible sale price - a rushed sale can never achieve this.

There are many factors that can affect the value of your business. Identify them, work on them, and you will put yourself in the best possible position.

Your employees are an asset

Your management team and a skilled and competent workforce can make your business more attractive to potential buyers. And more attractive means more valuable. A prospective buyer will be more eager to buy if a quality management team and workforce are already in place.

Maximise profitability

The more profitable your business the more valuable it is. In the run up to sale time you must assess every area of your business, find out which areas contribute the most profit and consider disposing of the areas that drag down your profit.

You should also consider holding on to only those assets that are necessary to the operational success of your business. If they're not, offload them. And before you begin talking to potential buyers, reduce your working capital to a level that accurately reflects your company's operating needs.

Settle any disputes

If you do have any legal actions, compliance issues or anything else that might damage your prospects of achieving the best possible sale price, make sure you settle them before you start the process. You don't want to give your prospective buyers any reason to walk away.

Negotiating the sale price

Taking a valuation approach is a good start point for negotiating the sale price. In fact, valuing your business annually is good practice as it helps you to understand how your business initiatives are contributing to the value of your business.

Potential buyers will look at more than earnings; they will also look at your balance sheet. If your business can show it's in good financial shape, it will look attractive to any potential buyer.

You may also want to consider basing the sale price on future business performance by including an earn-out clause in the deal. This gives you the potential for a higher sale price since you receive a bonus on future earnings.

Ensuring you don't pay too much tax

Whatever jurisdiction governs you, there will be various ways of structuring the sale; some will be more tax efficient than others.

Structuring the sale the wrong way may damage the sale and lumber you with unwanted and unnecessary tax bills. Ensure you seek professional advice.

If you put your business on a sound financial footing, prepare properly, and manage your negotiations well, you put yourself in the best possible position to get the highest possible sale price.

Author: Marcel Bergeron