PREPARE YOUR BUSINESS FOR SALE - Dreams and Nightmares

PREPARING YOUR BUSINESS FOR SALE

Dreams and Nightmares by Mark Corke

Good Morning Bloggers

For a while, with his permission, I will be posting articles from Mark Corke of Suitegum.

Mark is a Business Broker, who writes articles on, and runs seminars on “Preparing you Business for Sale”. Should you wish to register for some of Mark’s free articles and tips, Here is the link.

Both Mark and I are of the opinion that ensuring that your Business is Prepared for Sale at all times will ensure that your business always commands the highest value. It actually increases the value of your Business quite considerably.

It hasn't happened to me for many years now, and long may it stay that way... The last time I experienced the terror, I was a much younger man. The shame, the embarrassment and cold sweat. Who knows? Who saw? Who cares? I would wake up in my bed, eyes wide in the dark, sweating and terrified. How the hell had I managed to get to the bottom of my road without my pants?.

"Fear is not an unknown emotion to us." Neil Armstrong

Have you ever had the dream where you get all dolled up to go out somewhere important? You find yourself walking down the road, talking excitedly with your mates as you all head off to the same party. As you approach your destination you gradually become aware that all is not quite right. Something is missing; your shirt is clean, you have a jersey or jacket for the cooler evening. But why the breeze? You subconsciously adjust your tie; and then it dawns on you.

The weird thing is that none of your mates has noticed until then. It's only once you grab down to cover your genitals that the others notice. And then they really notice, and the laughter starts. You wake with a start. Sweating.

I'm no psychologist, but the metaphor should not be wasted on us: Perhaps this is an early warning to us for our later lives; our pension lives maybe? As small business people, so many of us take the view that we cannot afford to make monthly payments towards pension funds and savings accounts, opting instead to invest in our own businesses. The aim of course is to ultimately sell the business, and use the proceeds to look after ourselves into our old age. For others who do save or contribute to pension schemes, the planned sale of a business will add even more wealth.

A wonderful ideal, and one that works brilliantly for many small business owners. For some it works better than they would ever have imagined, and they are better off than they thought to the tune of several millions, as their businesses sell for way more than they planned. And then of course all too many discover that they left home without their trousers. None of their friends tell them so, and the first they know about their shame is at the gates to the party.

Contrast that if you will, with a client of ours who had been made an offer for the purchase of half his shares in his business by a BEE group. With no idea as to the real value of his business, he approached Suitegum to ascertain a market value of the business. The result was a number in the region of R3M. Given that he had been offered R6M for 50%, we advised him to grab the deal. Understandably, the purchaser's bank declined to finance the deal, and it fell through. So at annual intervals, the business owner revisited the valuation, and made several improvements to the manner in which the business was conducted

Values jumped from the original R3M to more than R20M over the next few years, and it is at this level that we are likely to help him conclude a deal before the end of the year. Please don't become intimidated by these figures in the millions. Last year I struggled to find more than R100,000 in the value of a small retail and wholesale enterprise. It was not run very well, and the reporting left a lot to be desired. I am finishing off a revaluation today, and am stunned by the improvement brought about by some simple interventions. Today that business will command a price in excess of R500,000. Without the valuation last year, it would more likely have deteriorated further.

Boyzangirls, it is such a simple matter to take stock of where you are every few years. A sort of business health check if you want. The cost is negligible in the greater scheme of things, and that very health check can provide you with valuable insights to making your current wealth vehicle a little bit faster and more comfortable. It may even alert you to an early exit and reinvestment before you have that girl in the pig tails examining your own little pig tail too far from decent cover.

Where to start? Prepare your financial statements properly, and get them up to date. It's that simple, and it is a legal requirement any way. Worry about consultants and valuations later.

Cheers
Mark Corke

Rob has been receiving a steady stream of competitor research questionnaires, but he still has a way to go before he has a good representative sample. He also still has several give away prizes to temp you to complete the questionnaire. Remember that he will be providing a copy of the results to all participants. This will give you, as a co-respondent, valuable information about how other respondents conduct their competitor research. To participate, download and save the file. Then open it and complete the questions as they are presented. The file automatically sends itself to Rob when completed.

I am running a new seminar series in Johannesburg, and in Cape Town and Durban during the course of the year. Please join me to learn how to Prepare your Business For Sale and Present Your Business For Transfer.

I hope to meet up with you there.

For additional information and course dates, please visit Mark and the Suitegum team on http://www.suitegum.co.za