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26 September 2019

Planning to sell a business

Forward Thinking Business Blog –

PKF-FPM clients occasionally receive unsolicited offers to buy their businesses. There are a lot of reasons why this happens. Successful businesses attract attention, particularly where they have a strong online presence or get media coverage. If you receive an offer, before talking to the potential buyer, it is a good idea to have a chat with someone experienced in selling businesses as this will give you an insight into what your business could be worth. (PKF FPM has a dedicated team who can help you.) Remember that the buyer may be talking to other businesses, so if you are serious about selling, be careful about playing too hard to get.

Plan ahead

In the start up phase of most businesses, owners put a lot of thought into planning — not least because having a robust business plan is essential if you want to raise finance. However, planning is equally important when you are preparing a business for sale and the earlier you start, the better your chances of getting the best price. Indeed, we at PKF-FPM suggest that even if you are never planning to sell your business, being ready for sale means your business is operating at a high performance level.

Profit is an obvious area to focus on. If you can show a potential buyer that you achieved consistent or growing profits over a number of years, that will help you get a better price. Similarly, having a good, consistent set of accounts for the previous few years is a definite advantage.

Building a strong team is another advantage as it means your business is more sustainable from a purchaser’s point of view.

If there are underlying problems in your business, these will be discovered when your potential purchaser carries out their due diligence. So, it makes sense to resolve these problems before embarking on the sales process. Ideally, for example, non-core business assets should be removed.

‘Even if you don’t intend to sell your business, it makes sense to think about what you would do if you received an unexpected offer’, says Feargal McCormack.

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What is my business worth?

Valuation is a topic we are often asked about. It is natural to want to know what your business is worth and there are various ways that this can be calculated. For example, it can be based on:

  • Earnings multiples
  • Discounted cashflow
  • Entry cost
  • Asset based valuation
  • Industry rules of thumb

Other factors to take into account include growth potential and intangible assets. Keep in mind that the circumstances of the sale may affect the price, particularly if the business is in trouble.

It is wise to look for purchasers who are a good strategic fit for your business and, where possible, to line up more than one potential buyer so that you have a fall back position if the sale falls through.

The lifecycle of a business owner falls into into three distinct stages:

  1. When your focus in on growing your business;
  2. When you being to plan for your eventual exit from the business.
  3. When your exit transaction takes place. This final stage should be as brief as possible to avoid disruption to your business.

Even if you have no intention of selling your business, it is worth putting a plan in place as circumstances can change. PKF-FPM runs regular seminars for business owners covering this and other topics.

Contact Feargal

Feargal McCormack / Managing Director

f.mccormack@pkffpm.com

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PKF-FPM Accountants Limited and PKF-FPM Accountants (Ireland) Limited are part of the PKF-FPM Group, branded PKF-FPM which is regulated by Chartered Accountants Ireland. PKF-FPM is a member firm of PKF International Limited.

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