Just as sensible homeowners carefully prepare their house for sale, business owners need to do the same – and, if anything, be even more organised and strategic. 

Unfortunately, a lot of the time, they’re not.

For most small and medium enterprise owners, their business is their livelihood today and, hopefully, on selling, a healthy nest egg for the future.

The most lucrative sales I’ve seen share a common denominator – the vendors began grooming the business for sale well before even contemplating putting it on the market. They realise the eventual sale price is likely to directly reflect the hard graft committed to consciously building a saleable business.

The disappointed vendors are often those who, by choice or unforseen circumstance, decide to sell, fantasising about a massive windfall … overlooking the fact they have done little to create a marketable venture.

Selling a business at a healthy profit is rarely a happy little accident. It takes foresight, discipline, sound advice … and some strategic preparation and lead-in time.

What lies beneath

To an astute, well-advised buyer, the business’ façade is only the beginning. Ramshackle records, systems and structures are just as telling – and off-putting – as an unkempt house.

Obviously, potential buyers are keen to see a good bottom line, but they’ve also got an eagle eye on other important factors. If you have dreams of selling your business one day, but are currently micro-managing your operation, start changing the nature of your input now! I know it can be hard and it will take time, but start working less "in” your business and more "on” your business.

A venture that relies heavily on the owner for its day-to-day success is generally one of the bigger turn-offs with buyers. After all, if they’re not getting you as part of the deal, they want to know the operation’s systems and structures are effective in their own right, and not dependent on an individual.

Another helpful litmus test is: if your health deteriorated tomorrow and you needed to sell quickly, what sort of state are your business affairs in?

Are your accounts and employee and supplier contracts, as well as any lease and insurance agreements, fit for scrutiny? If you feel a little queasy at the thought, ease your conscience and start chipping away at getting your house in order.

Avoid headaches – and claims

Hastily assembled, incomplete or inaccurate records don’t usually make for a happy, smooth sale process. Unwitting or not, inaccuracies can – and do – come back to bite vendors well past the sale date. If, for example, in the sale and purchase agreement the turnover, as stated by the vendor, is inflated, the new owner has recourse to claim compensation.

Even if you have no intention of putting your venture on the market in the short-to-medium term, but you know you wouldn’t be putting your best business foot forward if you unexpectedly had to sell, why not start putting things right now? Swing by to see your professional advisers and create a "to do” list that sets a framework to groom your business for a profitable and rewarding sale.

Your lawyer can ensure all your legal requirements are ship-shape, while your accountant is a mine of information in terms of financial record management, and can also give you some indications of what your venture might be worth and where it’s selling itself short.

If you don’t like what you hear, now’s the time to start smartening up your business’ act, so you can reap the rewards when the time comes to sell up.

Feedback, comments and questions are always welcomed – please feel free to e-mail me on [email protected].

T: 03 443 0900

W: www.aspiringlaw.co.nz

Janice Hughes is a Director of, and senior legal adviser at, Aspiring Law. Please remember, this information is designed as a general guide, and should not replace specific legal advice on a particular issue.