Deciding to sell your business is a big decision and can be difficult for many reasons.
You may not know what you’re doing, you could have decided to sell without proper preparation, or you may just feel totally overwhelmed by the whole process. And in today’s fast-paced, competitive and digital-first economy, the right steps are crucial to ensure the optimum outcome while minimising risk. In this article, leading experts across the small business, franchising and financial sectors share their insider tips to help your exit plan be exciting and empowering.
Nic Brill, CEO of PoolWerx
Be sale ready before you put your business on the market
You wouldn’t sell your house without giving it a spruce up. First impressions are everything – refresh your store externally first then internally, including signage, uniforms and your vans too.
To maximise and showcase the value of your business, it’s important you truly understand where it lies. Do you know your customer base and have a full and complete client database? Do you have a clear understanding of your assets – vehicles, stock, equipment, fit-out, technology. Can you provide a complete business history and solid financial records for the past three years? These are all extremely important to buyers and having this information to hand will make it easier to sell your business.
Don’t forget to invest in your staffs’ training and retention. Buyers want peace of mind knowing staff are fully accredited and experienced when they come into a new business.
Be realistic about your business’ value
You have built a business with your blood, sweat and tears. It might even have been in the family for generations. Owners have a really strong emotional connection to their business – I know I do as a founder. But be realistic about what your business is worth.
It’s easy for owners to sometimes have an inflated view of their business’ worth – but buyers will only pay for what the business is worth. If you are trying to sell at too high a price, buyers will run away before negotiations even start.
Remember to also budget for any additional fees – accountants, lawyers, brokers, stamp duty, training time, Capital Gains Tax – to avoid any unexpected surprises.
Timing the sale right
Some people think they need to sell at a particular time in the business cycle, whether the end of the Financial Year or the end of the summer. That’s not the case. If you’ve lost your mojo, if it’s all becoming a little too difficult, if you’re finding it hard to smile at every customer that comes through the door, or hard to get out of bed – I dare say the time has come.
One thing to look out for is the timing of your lease. You want to ensure it has more than two or three years to go, this will appeal to potential owners who know they don’t won’t have to worry about lease negotiation in the years to come, again, making your business more appealing.
We all need an exit plan. In fact, you need to manage your business to the point where it is always sale ready, even if you don’t plan to sell as it brings a state of excellence to your brand. And don’t forget, the right buyer never knocks at a convenient time.
Jun Lee, Executive Director of Innoveil Gami, trading as Gami Chicken
Legal requirements and procedures of COS
Understanding what legally needs to be prepared is a critical foundation for selling a business or franchise. Selling a business or franchise includes dealing with several key legal aspects, such as the “sale of the business entity”, “closing business accounts with suppliers”, “transferring relevant licenses”, and “transferring the lease or entering into a new lease with the landlord”. These legal procedures often determine how long it may take to complete the sale and are closely associated with many financial costs, which can also affect the price of the business sale. Therefore, having a complete understanding of what is legally required when selling a business is crucial to consider.
Selling a business requires solid financial planning due to the potential costs that may arise before the money can be recouped after the sale procedure is complete. You will need to assess your Accounts Payable (money that you owe) and any forecasted costs down to the last dollar, and prepare for them in advance.
When selling a business or franchise, it is essential to assess the future opportunities that might be missed and weigh them against the selling price you are aiming to achieve. In other words, asking a simple question, “Have you realised the full potential of your business?” can be helpful in deciding whether to sell and at what price. Sometimes, even a simple operational tweak, such as changing the seating arrangement or enhancing customer-facing steps, can result in a noticeable improvement in your sales.
Jade Winter, Co-Founder & CEO of Studio Pilates International
Before selling a franchise, owners should ensure that all financial records are transparent, accurate, and up-to-date, as prospective buyers will heavily scrutinise them.
Secondly, improving and maintaining the aesthetic and operational aspects of the business to make it as attractive as possible to potential buyers is vital.
Lastly, securing a proficient business broker or advisor if an in-house option is not available with the brand. Find one experienced in your industry, this can help to facilitate a smoother sale process, ensuring that you attain the best possible price and terms.
Dani Peleva, CEO and Founder of Franchise Fame
Evaluate your business and brand value. A clear articulation of the franchise value proposition and brand is crucial when selling. This involves highlighting the unique selling points, market position, and potential for growth and profitability. A well-defined value proposition can attract the right buyers and justify the asking price.
Develop your franchisee buyer persona. Understanding who the ideal buyer is and what qualities they should possess is essential. Sellers need to consider whether the prospective buyer has the necessary experience, financial capability, and vision to grow the business and sustain it in the long run. Identifying the right buyer is crucial for the ongoing success of the franchise, ensuring continued royalty revenues and brand integrity.
Have the operational and legal framework in place. Franchisors must be aware of their legal obligations when selling a franchise. This involves understanding contractual agreements with suppliers, vendors, landlords, employees’ rights and benefits packages as well as any existing licenses or permits required for operation.
Complying with these legal obligations ensures transparency during the sales process and minimises potential disputes or complications down the line.
Additionally, having well-documented operation manuals, established supply chains, and sound contractual relationships ensures that the franchisee can have a successful start and can replicate the business model effectively. A smooth transition and a strong start are crucial for the continued success and growth of the franchise.
Ryan Gair, CEO and Co-Founder of Rate Money
You should consider the reasons why you want to sell. Are you looking to retire, pursue other opportunities, or simply cash out? Understanding your motivation will help guide your decisions throughout the selling process. You should always consider, is it worth selling the franchise or is it better to recruit a manager or someone else to run the business?
Are you exiting at the right time? Consider when the best time to sell your business is. Market conditions, industry trends, and the business’s financial performance can all impact the timing of your sale. Selling at the right time can maximise your return.
Review all contracts, leases, agreements and legal obligations tied to your business or franchise and consider all exit clauses. If you decide it’s the right time to sell, seek legal and financial advice to carefully plan a successful transition.
Kylee Valentine, Senior Partner in the Accounting and Tax division at Findex
There are things you can do over a longer period of time to make sure you’re ‘seller ready’. Clean up the balance sheet, make sure that your business is running as profitably as it can so there’s not too much that needs to happen to make it look good from a sell position. The other thing is making sure that your franchisees, as they go along, are focused on what their ‘end game’ looks like. So how are they preparing for that whether it’s a sale or retirement.
How much do they need? Have they been planning for that from the start to make sure they’re maximising every opportunity that they have each year? Super contributions are great for retirement, and they save you tax as you go along. Make sure that they’re really making wise decisions about what they do with their profit each year, so at the end, it’s not all about how much they’re going to get for that franchise.
Raghu Rajakumar, CEO of Eden Exchange
The future of franchising promises a dynamic mix of challenges and opportunities. With the tsunami of retiring baby boomers and the subsequent transfer of generational wealth, the landscape of business ownership is undergoing a seismic transformation.
As millions of baby boomers reach retirement age, a tremendous transfer of business assets, estimated to be worth AU$6.75 trillion, is expected in the coming years. This paradigm shift necessitates innovative solutions to meet the unique needs and challenges faced by aspiring entrepreneurs. So, if you haven’t begun preparing for this yet, start now, and our recent ebook is the perfect guide to help start navigating the sale of your business.
Harness the power of data, standardise practices and embrace evolving recruitment strategies to thrive. Hold tight and be consistent, because there’s a ‘Golden Age’ coming to the selling landscape.
Want to find out more about how to sell your business? Download Eden Exchange’s free new eBook ‘Make Selling Your Business a Success’ here.
About Eden Exchange
Eden Exchange is a revolutionary online marketplace for buying and selling businesses. Its premier, all-in-one platform seamlessly connects buyers and sellers, reshaping the landscape of business transactions. With an extensive network with expertise in business sales, Eden Exchange guides clients and users through each step of the business transaction, offering support from lead and deal origination to preparation and transaction. Trusted by an extensive range of clients, including renowned brands such as The Cheesecake Shop, Roll’d Australia and Poolwerx, Eden Exchange has become the go-to destination for businesses of all sizes to achieve their goals. For more information, visit edenexchange.com or follow us on LinkedIn, X, Facebook and Instagram.
To keep up to date on business news, and for tips and advice, read more from our team here.