MARKETING YOUR BUSINESS TO POTENTIAL BUYERS
If you plan to commission the services of a business transfer agent, they will guide you though the marketing and ‘packaging’ of your business for sale. However, we recommend that you do not pay more than a few hundred pounds up-front to a broker. A small up front payment demonstrates your genuine commitment to sell, but we believe a good business broker should receive their core commission from results, not hefty up front charges.
Whether you elect to try to sell your business yourself or via an agent we recommend the following as best practice:-
Think carefully about confidentiality – how much information should you reveal and to whom?
(a) Confidentiality from Your Staff: To tell or not to tell that is the question?
Many business sellers choose not to tell their staff until they have found a buyer and exchanged contracts (i.e. the sale has become legally binding.) Why? Because the impending change of ownership tends to unsettle employees (they fear for the security of their jobs and they fear the possible changes a new owner/manager may bring.)
In many cases this can result in a loss of productivity and motivation as staff gossip and worry about the change - in more extreme cases - being advised of the possible sale of their employer’s business may act as a catalyst for them to resign. Dealing with the hassle of having to recruit and train new staff and the corresponding detrimental effect on the performance of your business is not an ideal scenario part way through the marketing and sale of your business.
(b) Confidentiality from other parties.
Depending upon the type of business you plan to sell, your intention to sell becoming public knowledge may either be:
Or
Strategically damaging
Clients loyal to the existing ownership may decide to try someone else and competitors may broadcast the fact with spin to try to take advantage. Both scenarios are likely to be damaging to your sales and the corresponding perceived business value and likely achievable price.
The dilemma for many businesses owners is that your fiercest rival may also be your best fit buyer and the risk reward of such an approach requires careful and objective consideration of risk versus reward.
I have decided to advise a party that I may be prepared to sell my business, what information should I give them?
In the first instance we would recommend providing a high level outline of the business with annual turnover, gross profit, property costs and employment costs. Parties expressing an interest having viewed the outline details should then generally be asked to show commitment by meeting with the seller via means of an informal viewing at the business premises. If staff confidentiality is an issue this can be done outside of trading hours, or, depending on the nature of the business being sold, viewing may be conducted under the guise of the ‘viewer’ being a prospective customer, supplier or even a business consultant.
Once you (or an agent acting for you) is satisfied that the prospective buyer is genuine in intent, it is normal to seek further protection by asking them to sign a confidentiality agreement [a sample confidentiality agreement template is available via LINK TO WEBSHOP.
Once a confidentiality agreement has been signed, it is normal to provide the following information to prospective buyers to allow them to make a more detailed assessment of your business:-
- 3 years accounts
- Outline details of staffing and trading hours
- Copy of the lease(s) or at least outline lease terms (for leasehold properties if you own the freehold, but plan to retain the property and grant a lease to the buyer of your business.)
- For franchise Resale’s – a copy of the franchise agreement or alternatively an outline of the key terms
