Open Or Closed Book? When It's Good Sense to Tell the World You're Selling Your Business

If you are considering selling your small to medium sized business, you no doubt want to ensure you get your business marketed to the right people and as clearly as possible. Many businesses rely on total discretion and confidentiality when they go up for sale, in fear of losing a client base, a reputation or even stock market value. However, there are many instances where it would help your cause a great deal if it was well known that your business is up for sale. Let's look at some good examples of when it is most likely safe to make a big noise about your sale and ensure your business gets noticed on the marketplace.

The obvious industry is the food sector. If you run a search on the major business for sale portals, you'll instantly see that there is a whole minefield of cafés, diners, restaurants and take away outlets up for sale. These kinds of businesses change hands quite often and are a good business to sell because in most cases, they already have a footing in the local area, are known by the local residents and should already have a loyal customer base.

More importantly though is the fact that anyone becoming aware of this kind of business being sold will make very little negative impact. In fact, when a restaurant or café changes hands, it can have the opposite effect and create a new positive, fresh outlook for customers new and old. With so many on the marketplace, there is a lot to choose from so any potential suitor effectively has the upper hand because they have so many options available to them. This is why in a situation such as this, you need to make as much noise as you can. For every café up for sale in any town or city, you can count several others will be too. Businesses such as these change hands often because they require a very intense level of dedication from the owners. Some go into running a business such as this with a great deal of optimism and enthusiasm, only to find that its really hard work and too much to take on. Within a year or two, they've had enough and are ready to move on. Sound familiar?

If this is you, then you are not alone. Any business in the food industry is tough graft and like every other business in this sector that is up for sale, you need to ensure your marketing doesn't reflect this and that your business for sale appeals to these fresh, enthusiastic and energetic individuals. So if you have an advert online or are about to embark on advertising your business, try to spend some time getting your advert up to scratch.

Take some good quality photos of the premises. But make sure you clean the place first and make it look great. Remember, you're selling a dream! Also, take the time to get your figures in order, especially profit margins, turnover and any other information that will help really sell the dream to the next owner. If you want to sell your business in an already saturated industry sector, you need to make some serious effort. One big push will help you sell it faster. So don't put an advert online with only a few poultry lines of text. Really give the full details and take as many pictures as you can to give any interested parties a real feel for the place.

And finally, don't get greedy. Have your business valued correctly and put it on the market for what it's worth. If you need some advice on this area, read another of my articles that covers business valuations and how to price it correctly.

Selling a business is a tough task and it is time consuming. But if you want to get it sold, you need to put in the time and effort. If you are based in an area surrounded by other businesses, it might not be such a bad idea to tell your neighbours of your intensions. They may know someone who is looking to open a business such as yours. Your direct neighbours may even want to buy you out of your business so that they expand their business across your premises. The more people who know, the more opportunities that could arise. If you are certain that disclosing your intensions will have little impact on your business then tell the right people. Get on the search engines and start submitting adverts to the business for sale directories.

There are numerous examples of businesses that I have seen up for sale and quite clearly are happy to disclose the business name, location and price. Why? Because it sometimes pays to get it out there so that word can spread fast that an opportunity for someone else could be waiting around the corner. Example businesses include petrol stations, convenience stores, pubs and clubs, small boutique stores, shoe stores, take away and sandwich bars. Even tourism related businesses.

The One Question That Many Small Business Owners Fail to Honestly Ask

Small business owners and entrepreneurs are hard working with 70 to 80 hour workweeks. Yet sometimes these industrious, enterprising, individuals believe their sweat equity is equal if not exceeds actual dollars and cents. The reason for this gap between what is believed to be true and what is actually true is because there has not been a succession plan based upon an objective business valuation.

Recently I interviewed Mark Machnic who is not only a CPA, but holds additional credentials including CVA, CFFA, CFDP and CDFA and is the principal for Business & Matrimonial Valuation Services, LLC of Schererville, IN. Mark's expertise allowed me to ask him a series of questions specific to these two often ignored aspects of small business management:

Business valuation

Succession planning

Why is it so important to understand business valuation?

"Most people do not understand the true value of the business. From my experience, people think the business is worth the net income any given year. They fail to take into consideration the goodwill aspect of the business, past earnings, and projected future earnings. Also, the process of valuing a business involves comparing the subject company to its industry peers by utilizing various databases."

What part does business valuation play within succession planning?

"The business valuation can be used as a benchmark for succession planning. The projections made within the valuation can be used as a trigger mechanism for recruiting the most qualified employees and for helping train current employees for advancement into more responsible positions. The valuation can be used to set goals based on projections of future earnings."

What is the most consistent misunderstanding that business owners have respective to the value of their business?

"Most business owners do not take goodwill into account when valuing their businesses. They tend to focus on the tangible hard assets instead of some of the intangibles such as goodwill. They also focus on the current income of the company, not taking into consideration past earnings or the future outlook of the company."

Besides not knowing what their business is worth, what is the second most common mistake you observe with business owners and executives?

"From a valuation standpoint, business owners do not understand how to add value to their business. The goal of a business owner should be to build a successful business that will attract numerous potential buyers. They need to know how to increase the value of their businesses and also to "keep the house" in order at all times. A business owner never knows when someone will come in and make an offer."

Finally, what are some issues within the current economic environment that will require business valuations?

"Business owners or those in management roles may be looking to merge or sell during tough economic times. If the economy is causing a negative effect on a business, the owners look at their options. During tough economic times, the number of qualified buyers tends to decrease, making it more difficult to sell a business."

When you, as the small business owner, know the actual worth of your company, hire the best of the best (because your company can demonstrate that worth) and continually add value to your business, then you can be the Red Jacket in the sea of gray suits. Not knowing may place you with all those other failed businesses and you become one of the many and not one of the few to succeed.

Five Inconvenient Truths About UK Business Plans

I am a business advisor so I talk to a lot of business owners and it constantly astounds me how many do little or no planning. In the UK business plans are still not considered core tools for running a sound business. Without a plan, or at the very least an income, expenditure and cash flow forecast, it is very difficult to know how well your business is currently performing, let alone where it is headed.

Writing a business plan need not be a huge chore, there are plenty of good software programmes around, which usually include ready made business plans, to give you a head start. There are also plenty of professional business plan writers eager to assist. So why is it that the following five truths still prevail?

1. Many UK companies simply do not have a business plan

Not having a plan is like walking around in the dark without a torch. You may get where you are going but it will take longer and you will probably trip over several times on route.

I recently helped a business move from being loss making to making a good profit. All I had to do was forecast income and expenditure figures. It immediately became blindingly obvious that, unless my client put up his prices, he would continue to fail. A small price increase, against existing client accounts, soon sorted out his problem.

If he had an active, simple financial plan, which he could easily have put together using a good business planning software programme, he would not have got into difficulty in the first place and would have saved money by not needing my services.

2. Start-up businesses are often too optimistic in their income forecasts

We all tend to be over optimistic. There are plenty of high profile, high value projects that ended up with a price tag many time greater than the initial budget forecast - the building of the Channel Tunnel or the Millennium Dome (now the O2 Arena in Greenwich) are just two examples. Getting input from professional business plan writers is one way to deal with this problem.

Having an active plan also means that you can monitor actual performance against your plan and take action if you see that things are going off course.

3. Business owners do not know what is in their business plans

This can happen when professional business plan writers are brought in. The plan they create is fabulous, it secures the funds the business needs, but all too often the business owner never really understood what was in their plan, so it is of little ongoing use and their business risks going off track. If you hire in professional business plan writers ensure you understand what they have said about your business and that you know how to monitor your performance against your plan.

4. Start-up companies do a bad job of identifying their target markets

Perhaps one of the most tricky elements is identifying your target markets. It is not necessary to do lots of research but it is important to think deeply about what you know about the people who will buy your products and services. Who are they? How old are they? How wealthy are they? Where do they live? What do they like and dislike? Where and how to they currently buy similar services and products to those you will be providing?

If you have worked through the above questions and based your marketing strategy and sales forecasts on what you discovered, your plan will be stronger. If you also devise mechanisms for monitoring performance, based on the knowledge and assumptions behind your forecasts, you will have a much greater chance of improving your sales forecasts and marketing strategies, as your business develops.

5. Once UK business plans are written they just collect dust somewhere

Too many UK plans are filed on the 'don't bother to read this ever again' shelf. A business plan is a tool for managing your business performance. It needs to be kept up to date and used as a monitoring tool. If you took the wise decision of investing in good software to write your plan, you will have built in monitoring tools as part of the package. This makes it easy to monitor actual income, expenditure and cash flows against your plan, which is essential if you want to avoid unwelcome surprises or even failure.

In the current economic climate it is essential for all businesses to have plans and all UK business plans should be live documents. Time invested in developing your plan is only of value if you use your plan as a monitoring tool to help you manage your business. This is even more important in the current challenging economic climate.