PREPARE YOUR BUSINESS FOR SALE - PLANNING

PREPARE YOUR BUSINESS FOR SALE – PLANNING, BY MARK CORKE

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Over the last two weeks I have written about the different business leagues that SMEs must traverse on their way to greatness and the resulting rewards their owners receive en route, initially, and then in the final sale of their businesses. Those writings certainly caused a response, and we have been busy on the phones as a result. Much of the response centered around how much more expensive it is to run a company than a close corporation. Those people all missed the point: You want to maximize the selling price of your business, and if investing a bit of money helps achieve this, then all the better.


Don't Go for Broke


It is important, when one considers the possibility of one day selling a business, that one understands that there must always be an upside in the sale of a business. In order for a purchaser to put pen to agreement, he must believe that he is going to take this "money spinner" which the broker and seller have been raving about, and turn it into something really exciting. If the buyer sees more upside than risk, the seller will close a deal. Most serious buyers live by a simple maxim of "when in doubt, look about". They look about until they find a reason to move on. It is a frustrating time for all concerned.


It will never help the seller's cause if he waits until he has sucked the business dry of any immediate growth, leaving possibilities only for the most enterprising buyers with great big steel dangly things. Last week we saw how the perception of "onerous" can be a deterrent to real value realization. Moving one's business into the league of real value requires "onerous" to be tackled and dealt with. Not so long ago the Boks were dealing with "onerous" as they dealt with all manner of stumbling blocks and difficulties, not all physical and psychological, but political as well. Thank goodness they prevailed, moving from a losing side with very little public support to the glorious team that no South African will ignore today. Planning for the final event was onerous. Implementing the plan was both meticulous and onerous. A simple self belief and excellent leadership (gratefully away from home interference) made it all happen.


When my father died just prior to Christmas, two years ago, the important people whom he would have wanted to deliver the eulogy were on holiday abroad. As the oldest of my siblings, I volunteered to do the job. I locked myself away for a day, and worked hard to prepare the address. It went off without a hitch, and the copy was published in several newspapers nationally. A difficult and onerous job, well prepared, turned into something Dad would have been proud of.


Planning for one's demise may seem a bit dark, but the prudent amongst us do it all the time - wills, life assurance, dread disease cover, key man insurance etc.
If you're a prudent person, you have those things. And yet; is your business prepared for sale? If you are incapacitated, unable to work, knowing your business is going downhill, wouldn't you be just that little bit happier knowing that you can call your local business broker, and provide him with something meaningful to sell, prepared when you were not as desperate as you feel in your hospital bed.


Many businesses reach a value in excess of the value of the owners' homes. Lying incapacitated, they watch their businesses die, and sell their homes to keep the wolf from the door. Once recovered, they have neither a home nor a business. Try another approach: Incapacitated; sell the business you cannot run anyway, settle your bond, recuperate without the financial stress. Then once recovered, use your debt free home to finance your new start in life. I have seen it happen, and it works a dream.


We are in contact with about 80 private equity funds. Collectively, they have access to more than R20 billion Rands. They buy businesses which are well prepared for sale. The others... well let's just say the people with money ignore them.


CheersMark Corke