Closing a Business

Selling Your Business
Some of the critical issues that will be involved in the sale of a business are:

  • Finding buyers - qualify them to see if they can afford the cash you want
  • Business Brokers - if you intend to sell through a broker
  • Customers - keep happy so they don't flee when they hear
  • Competitors - keep your privacy so they don't know your business
  • Employees - inform them of the sale but only at the right time
  • What is your business worth - pricing the business
  • Arriving at goodwill value - makes a difference to the price

Prepare the Business for Sale

Prepare your business before you put it on the market. As soon as the business is on the market there may be intense interest in it and you will have little time to make any other improvements you thought necessary. Preparing a business is like preparing a car. You have to clean it out, tidy it up and present it in the most attractive way to a potential buyer.

What Buyers Look At
These are some pf the things a buyer needs to look at:

  • Financial records. The profitability of the business is what will determine whether a buyer will want to buy or not.

  • Stock. The buyer will want to see the stock figures and will be interested in the method of valuation of that stock.

  • Assets. The buyer will want to see a full list of the plant and equipment, as well as the office machinery that belongs to the business.

  • Staff. The buyer will need to check the staff records to determine the background, experience and the skills of each employee.

  • Customers. The buyer will look at the customers to identify the good customers as well as customers who do not buy very much.

  • Intellectual property. The buyer will assess the value of the intellectual property.

  • Debtors and Creditors. The buyer will need to see a list of the debtors (the people who owe the business money) and the creditors (the people the business owes money to).

  • Competitors. The buyer will want to be very clear about the competition.

  • Insurance. The buyer will need to make sure there is sufficient cover in place to protect all the assets of the business.

  • Lease. The buyer will need to look at the lease agreement to make sure the terms of lease are acceptable.

  • Premises. The buyer will look over the premises and make sure they are suitable for the operation.

  • Location. The location, of course, is important to any business.

  • Marketing. The buyer will be looking at marketing methods used by the business.

  • Legal matters. The buyer will need to know if there are any legal issues outstanding.

Doing “Due Diligence”
Once a letter of intent has been passed over from the buyer, that buyer will carry out what is known as "due diligence".

Due diligence simply means that the buyer will check things out fully. It involves a detailed investigation of every area of the business, starting from the financials down to production, sales, marketing and includes such minor things as the hours the business operates.