In Show 073 – Why You Need a Broker with Warwick Peters originally broadcast on Facebook Live on Wednesday 21 March 2018 we explore this interesting topic.
Download the worksheet here: WorkSheet 073
In today’s episode we continue our discussion on Phase 11: Selling your business. We have invited Warwick Peters to join us. Warwick is an accredited business broker with Ray White Commercial. We’ve known Warwick for many years and are happy to have him back on the show. We previously had him on which focused on Phase 5: Protecting your intellectual property. Warwick helps businesses to discover where their profitability lies and how best to structure themselves prior to a sale. He helps to break down and analyze what problems exist in any given company and helps to fix them.
One of the biggest mistakes companies make when trying to sell is going too fast. It can take as long as two months to get a business ready for a sale. The other issue is when too sell. The best time is usually during the first quarter right after Easter. That means you have to get the business ready for a sale during the Christmas season. Once the business is on the market it can take another two months before a sale is finalized. That is usually followed by a another month for the due diligence process. That entire process can take as much as six months.
Having a business that is easily understood is key to achieving a successful sale. Your business can’t be overly complicated. On top of that you want your accounts to be clear and easy to understand. Being in a market that is growing is key. Businesses that are in decline will be much harder to sell.
Warwick has a number of recommendations for companies preparing for a sale. If you have a reasonably large business only about 25% of potential buyers will want to purchase the company outright. Around 75% want to buy the company and continue to have it managed by someone else. The big question is whether a company has somebody ready to take over the day-to-day management. Buyers will want a deal where the owner stays on for six months to train up the new management team. That means if you want to sell you need to bring on a replacement manager right away. Having a great set of accounts is critical. You need to show at least five years of continuous growth. You also need detailed documentation that details the process of the business.
Professionalism is what sells a business. A seller rarely understands what a buyer wants. If you don’t use a broker you will only understand your desires not what the buyer wants. A broker will help you to allow both sides to get what they want. A good broker will also be a good negotiator something most sellers don’t have any expertise in. A broker will also help to guide you through the many landmines that you will face during the sale process.
The most important thing you need to know before selling your business is understanding your limits. If there are things that you don’t understand get professional help. And don’t just hire anyone. Interview potential brokers to get a sense of their experience and level of professionalism.
What is the number one thing that people get wrong in business?
Most people are comfortable when buying a business but they never seem to operate it successfully. Operating a business year after year is really hard and often requires professional help.
What advice would you give to your younger self?
Start sooner. Warwick started 18 years ago and wishes he had started sooner. The more professional the market the less competition there is.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.