The time could be right to sell your business

There comes a time in the life of every successful business owner when selling your business looms on the horizon as a means to cash out and get the payday you deserve as part of your retirement plans. It is estimated that by 2028, the number of plus 65’s in New Zealand will be 1,320,000. Therefore, it is possible that there could be close to 20,000 businesses being sold by baby boomers in the next 5 to 10 years.

I’m sure you’ll agree that getting the payday you deserve when cashing out of your business is the aim of every business owner or entrepreneur. However, it is not just as simple as giving the prospective purchaser your financial statements.

There are a number of steps you need to take in order to get the best return on your investment. It starts with collecting all the relevant information and preparing a ‘Selling Memorandum’ to present a favourable proposition to a prospective purchaser. There’s a reason it’s called selling your business.

Ideally, the process of selling your business should begin 2 to 3 years prior to you wanting to exit. Therefore, given that the target date could be some time away, you need to start compiling the necessary information into a ‘Selling Memorandum’ in order to earn the best return when you eventually sell.  

So, what exactly is a ‘Selling Memorandum’? 

A Selling Memorandum contains vital business information and documentation along with details of the unique features of your business. It details all the relevant business information and is provided to prospective buyers during preliminary discussions relating to succession of the business. 

A Selling Memorandum will assist prospective buyers to make an informed decision about the purchase of your business. Therefore, it is essential that prospective buyers are provided with the most accurate and up-to-date information relating to your business. A Confidentiality Agreement should also be prepared, and signed by prospective buyers and possible successors, before handing over your Selling Memorandum to them.

Why is a Selling Memorandum so important? 

If buyers have a high degree of confidence in the accuracy of the information provided to them, this will be reflected not only in the sale price, but in the entire sale process.  

The Selling Memorandum is a simple tool that is used to demonstrate the uniqueness of your business. Think of it as an advertisement, so why not make your proposition stand out from the rest. Don’t underestimate the buyer. They will be looking at two to three other businesses in your market i.e. your competitors. So, if it contains all the relevant sale information which will assist in sale discussions why not make the buyers decision easier to go with you.  

A massive benefit of the Selling Memorandum is that it will increase your opportunities for sale and at the price you want. Having a stand out memorandum could result in multiple bidders for your business giving you options about who you pass on your legacy to.

What does a Selling Memorandum contain? Some of the information to be included in your Selling Memorandum includes:  

• A confidentiality and non-disclosure agreement
• The products or services you provide  
• The history of your business  
• Complete details of your clients  
• An overview of employees and employee agreements  
• Details of business achievements  
• Company policy documents  
• Business alliance agreements  
• Details of your unique selling points  
• Financial information  
• Business Plan  
• Marketing Plan  
• Licences & Accreditations  
• Register of information available for buyers’ due diligence – including financial information and documentation. 

One of the key inclusions in your Selling Memorandum is your unique selling points. Your unique selling points are the features that distinguish your business from your competitors. Some examples of unique selling points could be:  

• Your high value client base  
• The business specialisation 
• An amazing business culture  
• A breakdown of net fees as a % of total income  
• Your level of sustainable income

You must only include true and accurate information. Provide a copy of your Selling Memorandum to your professional advisers to confirm its accuracy.

What documentation is required during the sale process?

Set out below is a list of the activities and documents typically required from enquiry to sale:

Want to know more?

If you are thinking about preparing your business for sale or handing it on through succession, then get in contact with us today via email to organise a free no obligation chat. Also, If you need an accountant in Auckland – feel free to reach out. We will listen and then formulate the best strategies to help you achieve your goals and we can even help you with preparing your Sales Memorandum. Alternatively, click on the Book A Call button now to get started.

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