If Microsoft can do it and increase profits by 60% and Amazon by 70% then other businesses can too.

I am hoping that people will begin to read great stories like these and get the feel good factor back. There is talk about the double dip recession but lets keep our minds focused on these great stories.

Profits jump at Microsoft by 60% boosted by Windows 7

Profits surge by 70% at Amazon

It is obvious that despite the US predicted to have a record deficit this year that America is out of recession and surging ahead. This in turn with bring along other countries like the UK for example and the rest of Europe.

How do I sell my business is often asked by business owners and can be answered by using the following check-list:

1. Price it right – do NOT over value your business.

This might be an obvious point to make and just like selling a house with business sales, if the price is set too high you will probably not even get any viewings and will certainly not sell.

Valuing a business to sell is not as easy as valuing a house and the only true value is where you end up with a willing buyer and a willing seller. However, having said that you will need to have it valued and to do so you will probably use a business broker – which leads nicely onto my next advice.

If your business has been on the market for more than three months and certainly for more than six months then I would suggest that it is over valued.

2. Use a broker to sell your business

Not all business brokers know their stuff, so I would recommend getting a valuation from at least two brokers or probably three. Be careful not to use the broker with the highest price, as this might not be the correct business valuation, it might be to entice you to use their services, as a high valuation will be music to your ears.

3. Be willing to accept ‘Vendor Finance’

I see too many business owners and for that matter too many business brokers not willing to accept vendor finance as part of the sale. For example, if your business is worth say £600,000, I would suggest accepting £200,000 as vendor finance, which will give the buyer a bit more room to manoeuvre with their own capital and bank finance. If they are using bank finance, then subject to the present economic situation, banks will lend upward of 60% of the purchase price. In this scenario 60% of £600,000 is £360,000, added to the vendor finance of £200,000 eaves the buyer to find £40,000, which opens the sale of your business to many more buyers. However, not all banks will see this quite in this way and may prefer the buyer to put up more than £40,000, but the idea is what I am trying to get across here.

4. Remember what you have had out of the business

When you are at the point of selling the business always remind yourself why you decided to sell it and reflect on what the business has provided you over the years, assuming you have had it for a while. Too many business owners forget that they have used the business to buy their home, to fund their life for X-years and so on; they then think it is so valuable and forget the reason they want to sell and end up with it on the market for months, if not years and then blame the agent. Blaming the agent might be valid if the valuation is wrong and where the business has been over-valued, but ultimately the final decisions rest with you.

5. Prepare your business for a sale.

Buyers of business are put off by sellers that how out of date information. Make sure you have up-to-date accounts and have your management accounts as up-to-date as possible and at your fingertips, this will serve to impress the buyer and give them confidence in the business.

6. Make yourself redundant

Leading up to the sale of your business you should look at making yourself redundant from the business. Delegate your work as much as possible so that the business will operate without you as much as possible. By doing this will open your business up to more potential buyers and in turn make it more desirable and more valuable. If necessary recruit someone to replace what you do in the business and spend time training them up before you put the business on the market.

You might be thinking that this will reduce the profits and thereby reduce the value of the business, but not necessarily. Let me explain by way of an example:

Option1. Business X is making profits of £120,000 per annum and the business is very dependent on the owner with him working 6 days a week from 8am to 7pm each day.

Option 2. Business X employs two people to replace himself at a total cost of £50,000 to the business thereby leaving a net profit of £80,000.

The value of the business using option 1 would be a multiple of between 1 and 2 so let us say 1.5 times profit, so a value of £180,000 – but this business will be difficult to sell, as the new owner will have to consider stepping into the shoes of an over-worked vendor.

The value of the business using option 2 would be a multiple of upwards of 3 and if it were a 3-times multiple this would be £240,000 and a more attractive option to buyers/investors. So even if the cost of replacing the employees cost up to £60,000 the business value would not be affected greatly, but you would have a much more attractive sales proposition to business buyers.

In option 2 the owner could spend a few months focusing on business plans and focus on improving the business in other ways, now that his time is not taken up running the business, which in turn would make it much more profitable and in turn more valuable for sale.

7. Employ a consultant

You could opt to employ a consultant to help you get your business into a saleable condition – email me for details – info@in-business.org.uk. A few thousand pounds spent sorting your business out before it is put on the market could earn your tens of thousands back in the asking price and a quick sale.

ENTREPRENEURS looking for corporate ‘bargains’ over the festive season have been in luck as thousands of businesses are up for sale across the UK.

Those with ready money have been able to pick up businesses cheaply from specialist brokers and listing agents.

Business Sale Report, a leading listing service, has seen a 30 per cent rise in the number of owners advertising in December compared with November. Director Robert Moore says in addition to sales of distressed businesses, entrepreneurs who previously held back because the market had been depressed are now selling.

‘If you have cash and are able to move quickly, it’s a good time,’ he says. ‘Any business where it is easy to see future cash flow is in demand.’

Christopher Jones of business broker Sunbelt says there are lots of buyers in the market looking for the right opportunities. ‘We’re seeing buyers coming out of the corporate world looking for cash flow,’ he says. ‘There are also strategic buyers, picking up equipment.’

Kevin Uphill, managing director of business broker Avondale, says: ‘Buyers are there. After all, where do people put their cash now?’

Buyers can also try to negotiate lower rents and cheaper loans. The Government is pressing banks to lend to small firms and buyers are even finding it possible to borrow from the vendors through deferred payments.

But alongside the festive crackers there are some real turkeys with hidden problems. ‘ There are opportunities, but you have to be pretty savvy,’ says Moore.

Buying a business that has already gone into administration is fraught with difficulties as the administrator must realise funds quickly, putting a tight deadline on deals. Buyers also have to question whether a business will withstand the departure of the owner, who is often the founder.

Uphill says: ‘ The biggest single issue is the quality of the information on smaller firms – without visibility, there are high risks. There are real opportunities but if you cannot see the risks, don’t touch it.’

Many of the potential buyers are first-timers, says Jones. But this market is also proving attractive for existing businesses that are seeking to increase their market share.

Chartered accountant Russell Bowyer, 47, from Linton, Cambridgeshire, is convinced that doing deals in a recession is a good idea and he is negotiating to invest in Deep Clean, a nationwide cleaning firm that specialises in commercial kitchens.

Bowyer has a long record of business ownership, albeit in the care and accounting sectors, and he has been looking to expand his portfolio for some time.

He believes Deep Clean fits the bill because insurers require all commercial kitchens to be cleaned. There is competition, of course, but Bowyer says: ‘There is a good market.’

Bowyer, who is a client of Sunbelt, adds: ‘There are thousands of businesses for sale and far fewer buyers.

‘Interest rates are also lower so, in theory, you can get cheap money. If you buy in a boom, there is more competition from other buyers and interest rates are higher.’

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