How To Get The Best Price For Your Business
When selling your business, getting the best price is often the top priority. But what does the "best price" really mean? It can differ from one business owner to another. For some, it's about maximizing the financial return, while for others, it may involve finding a buyer who is a great fit for the business, protecting the staff, and preserving the legacy. Regardless of your personal definition, there are several key steps you can take to ensure you secure the best price for your business.
1. Ensure Your Numbers Add Up
First and foremost, ensure your financials are solid. Buyers will want to see clean, accurate accounts without any hidden surprises. It’s crucial to have a good accountant and bookkeeper to help you maintain clear and logical financial records. Any anomalies in your financials—such as a one-off cost for an emergency roof repair—should be explained in a way that makes sense to potential buyers. While these adjustments are common and often acceptable, it's important to present them clearly.
Remember, good financial records are essential not only for your business’s valuation but also during the due diligence process, where everything gets closely examined. Due diligence is not about increasing the price—it’s about identifying any issues. So, ensuring your numbers are in order from the start will go a long way.
2. Demonstrate Future Growth Opportunities
If your business is already performing steadily year after year, growth opportunities may not be a significant concern. However, if you've identified potential areas for growth, it’s essential to start working on those opportunities. Proving that you have the foundation laid for a new revenue stream can significantly increase your valuation.
At Intelligent, we always say, “We can sell what we can evidence.” If you’ve already taken steps to realize a growth opportunity, you can present that as a key selling point. However, if you’ve only identified the opportunity without acting on it, buyers might question why you haven’t pursued it already. If you're the business owner, you are in the best position to capitalize on new opportunities.
3. Flexibility on Terms
The days of straightforward business sales at a fixed price are over. Many buyers will require financing, often covering 60-70% of the purchase price through loans. To secure the financing, the buyer’s lender will often insist on paying part of the price over time. This is commonly structured as either a deferred payment or an earn-out.
- Deferred Payment: This is when a portion of the sale price is paid at a later date. For example, a buyer may offer 70% of the agreed price upfront, with 30% deferred over time. This payment structure typically exists to mitigate risk during the transition period.
- Earn-Out: This structure ties additional payment to the future performance of the business. For instance, if the business achieves certain financial milestones (e.g., an additional £100,000 in profit), the seller receives further payment.
If an earn-out is part of the deal, make sure you are still involved in the business. Since the extra payments depend on future performance, if you're not active in the business, the chances of reaching those milestones decrease. Work closely with your broker to ensure that any earn-out terms are clear and manageable.
4. Work with a Good Broker
A strong, experienced broker will guide you through the process and help you understand all the terms of any offers. Getting the best price often requires some flexibility and negotiation between the buyer and the seller. A good broker will be a trusted advisor throughout the process, ensuring that you get the best possible price while also working within reasonable terms.
Conclusion: We're Here to Help
At Intelligent, we’re here to support you every step of the way. When you choose to sell your business through us, you will have a dedicated account manager to help guide you. We also offer access to an experienced completions director and solicitors who specialize in business transactions. So, if you're thinking about selling your business, don't be nervous—there’s support available to help you get the best price on the right terms.
As always, if you have any questions or need assistance, feel free to get in touch with the Intelligent team. We're always happy to help!