SMEs: preparing for a sale

SME business owners often fail to maximise the proceeds from the sale of their business because of limited or rushed preparation. After spending years building up a successful business, it is sometimes surprising to see how little preparation goes into planning for an exit.

When to start preparing?

The level of preparation required will differ for every business but it should start early – at least 12 to 18 months before a sale process is ideal to ensure there is sufficient time to rectify any potential deal issues and provide the greatest opportunity to maximise sale value. The extent to which some elements of the business can be “professionalised” in this timeframe can impact the level of confidence potential buyers will have in the numbers and business management generally; this is always positive to achieve the best deal outcome for a seller.

Some preparation thoughts

• Have you defined your strategy, formulated your equity story and created a realistic business plan?
• Is the corporate structure conducive for a sale?
• Have potential upsides been thoroughly investigated and valued to enhance negotiating position?
• Can your financial reporting withstand a thorough due diligence?
• Do you have adequate risk management and internal control processes in place, including suitable IT infrastructure?
• Have you dedicated appropriate time and personnel resources to prepare the business for the sale process?

How can we help?

At James Cowper Kreston, we can carry out a Business Sale Readiness assessment. Our assessment helps you develop a practical action plan to address the critical needs of the business to ensure a timely and successful divestment process which will generate the best possible result. For more information please contact me on the details listed above or by submitting an enquiry.

Not selling, but trying to expand? Make sure to read our next edition of Perspective to find out the correct way to go about purchasing a new business during your expansion. Available January 2019.

If you would like to read the Chinese Translation of this piece please click here.