Selling a business: navigating the sale process

  • by Adam Bannister 

Interview with...

Andrew Rogerson, owner and MD of Rogerson Business Services, Sacramento, CA
Topics covered:
Using a broker, exit strategy and maximising value of businesses
CV:
Owned five businesses, selling first at x 2.5 original purchase price. Chair of Sacramento Chapter, California Association of Business Brokers, highest business broker accreditation in California
Expertise:
business valuations, transaction analysis, consulting for sellers and buyers & for aspirant franchisees, machinery and equipment appraisals, range of sectors, US and international business
Location:
Sacramento, California
Sell a business

Andrew on the importance of using a broker...

If you want to sell a business privately then using a broker is really important. It helps put a professional between you and the other party, especially because most buyers and sellers haven’t done it too many times. 

So there are some rules to follow and having a professional in the middle can really smooth the waters. The professional knows what to disclose and in what order, and can be a sounding board for both parties.

On formulating an exit strategy...

A lot of businesses take about 15 months to prepare for sale, which most people would find surprising and say that’s way too long. But one of the most important things is to make sure all the sales are being recorded. 

Some business owners tend to put some money in their pocket, and if that’s happening you can’t show it on your tax returns, which buyers analyse. If you can’t show the correct level of sales then that will affect the selling price of the business. 

One my golden rules is to look at the transaction through the eyes of the other party

Make sure you report your taxes for at least 12 months and get it on your tax return. That’s the basis of negotiations about the selling price.

On the importance of patient and lengthy preparation before selling a business...

A lot of business owners tend to wake up one morning and say “I’m fed up with this” and want to put the business straight on the market. It can be a quick decision or they can think about it for a long period of time, but they’re not taking the right steps to put things in place.

So it could take six months to make the decision to put the business on the market and sell it, but if you haven’t been reporting the sales and improve the look and feel of the business, etc, then it will take a long period of time to sell the business and it stretches things out if you haven’t prepared properly. 

On the difficulties of selling...

It was taking about 6.5 months to sell a business [pre-credit crunch], now it’s taking about 8.5 months. 

But here’s the reality check: only about 20% of businesses actually sell, which comes as a surprise to business owners who presume it’s like a piece of furniture, that it will eventually sell. It’s not always the case.

On how to maximise the business value...

One of the things I encourage the seller to do, one my golden rules, is to look at the transaction through the eyes of the other party. A lot of sellers are so used to doing the same thing day in, day out.