Selling a business is one of the biggest decisions a business owner can make. Whether you have been building your business for five years or thirty, deciding when to sell, how to approach the sale and who to sell to can have a significant impact on the outcome.
There is no single right answer for every New Zealand business. But there are four questions worth considering before you put your business on the market.
The four key considerations are:
- When is the right time to sell?
- How should you approach the sale?
- To whom should you sell?
- Are you ready to let the business go?
1. WHEN Should You Sell Your Business?
Timing can make a big difference to a business sale.
The ideal time is not necessarily when you personally feel ready to walk away. It is worth considering whether the business is also in a position where a buyer can see its strengths and future potential.
A business that is performing consistently, has reliable financial records, good systems and a clear customer base can be easier for a prospective buyer to understand and assess.
Conversely, waiting until you are under financial pressure, exhausted or urgently need to sell can reduce your options.
Ask yourself:
- Is the business performing well?
- Are sales and profits reasonably stable?
- Is there a clear story about the future potential of the business?
- Do I have enough time to prepare for a sale properly?
- Am I selling because I have made a considered decision, or because I feel I have no choice?
There is rarely a perfect time to sell, but having choices is valuable.
If you are not under pressure to sell, you may be able to prepare the business, wait for suitable market conditions and choose the right time to approach buyers.
2. HOW Should You Sell Your Business?
There is more than one way to sell a business.
You might sell privately, use a business broker, market the opportunity through a specialist business-for-sale website, approach potential strategic buyers directly, or use a combination of methods.
The right approach depends on the type and size of your business, the likely buyer, how confidential you need the sale to be and how much time you want to devote to managing enquiries and negotiations.
One thing is common to most successful sales: buyers need to know that the opportunity exists.
Keeping a sale too quiet can mean that your best buyer never hears about it. On the other hand, sensitive information does not necessarily need to be released to everyone immediately.
A sensible approach is to create enough market exposure to attract genuine buyers while controlling the detailed information provided as buyers progress.
Depending on your circumstances, this could involve:
- Listing the business on a specialist business-for-sale marketplace
- Working with a business broker
- Using your professional and industry networks
- Approaching selected potential buyers
- Combining several appropriate marketing channels
The aim is simple: give the right buyers an opportunity to discover the business while managing the sale professionally.
Find out how to list a business for sale.
3. TO WHOM Should You Sell?
Your buyer could be almost anyone.
It might be another business owner looking for an acquisition, an entrepreneur buying their first business, an investor, a competitor, an employee, a family member or someone looking to relocate to a different part of New Zealand.
For some businesses, there may also be interest from overseas buyers.
The important point is not simply finding someone who wants to buy. It is finding a buyer who is right for the business and capable of completing the purchase.
Think about what makes your business attractive.
- Does it have strong recurring income?
- Does it have a valuable customer base?
- Is there room for growth?
- Would it complement another business?
- Does it offer a lifestyle opportunity?
- Could a new owner improve or expand it?
- Does its location provide a particular advantage?
The answers can help identify the types of buyers most likely to see the value in what you have built.
And don't assume your buyer will come from your local area. A successful business in Christchurch may appeal to a buyer from Auckland, Wellington, Queenstown or elsewhere in New Zealand.
Find out who may buy your business.
4. ARE You Ready to Let Go?
There is also a personal side to selling a business.
For many owners, the business has been a major part of their life. It may provide their income, routine, relationships, sense of purpose and identity.
That can make the decision to sell surprisingly emotional.
It is worth thinking about what you will do after the sale as well as what you want to achieve from it.
Will you retire? Start another business? Invest? Travel? Spend more time with family? Take on a completely different challenge?
Being prepared for life after the business can make it easier to remain objective during negotiations.
It can also help to recognise that the value of the business to you personally may be different from its market value to a buyer.
You have built the business. Eventually, someone else will need to see the opportunity in taking it forward.
Think About the Sale Before You Need to Sell
You don't have to put your business on the market just because you are starting to think about selling.
In fact, planning ahead can be one of the most useful things you do.
It gives you time to improve financial records, strengthen systems, reduce unnecessary owner dependence and make the business easier for a buyer to understand.
It also gives you time to consider the three big questions:
When will I sell? How will I sell? Who is most likely to buy?
Once those decisions become clearer, the practical selling process becomes much easier to plan.
So, When, How and to Whom?
There is no formula that guarantees the perfect business sale.
But a well-considered decision starts with three fundamentals:
- When: sell when the business and your personal circumstances make the timing appropriate.
- How: choose a selling and marketing approach that gives the business sufficient exposure while protecting your interests.
- To whom: look beyond the obvious buyer and find someone who understands the opportunity and can complete the purchase.
And don't overlook the fourth consideration:
Are you ready to let go?
Selling a business is a process rather than a single event. Once you've decided that the time is right, you can move on to preparing the business, marketing the opportunity, dealing with buyers, negotiating terms and completing the sale.