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When is the right time to sell my business?

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With family business succession becoming more challenging, more and more SME owners are choosing to sell their firm on the open market. But how long does it take? How much is my business worth? When is the right time to sell? 

How do I assess whether my business is ready to sell?

BCMS speaks to many business owners each week, and surprisingly few are aware of the inherent value of their business. Some are too close to their business to appreciate its commercial appeal to others. Others are looking to wind the business down because with no clear succession plan in place they feel it is their only option.

Your business does not start and end with you. Your customers, your IP, your contracts, your staff expertise, your brand, your portfolio, your relationships, your reputation – all these things have a potential value to an acquirer.

How do I value my business?

We never take a company to market with a value attached as it encourages bartering, price-chipping and bargain-hunting. Only an acquirer with a strategic motive and a sense of the future potential for your business can decide its true worth. A good advisor will ensure that the market understands the scope and true value without putting a price tag on at the starto

Whose services will I need?

The sale of a business is first and foremost a sales and marketing exercise – not a financial one. An advisor-led transaction includes carefully researching potential buyers, pitching the opportunity correctly, meeting with interested parties, and negotiating price and deal terms.

When is the best time to sell?

Retirement is by far the most common trigger for a business to change hands. But increasingly, we are seeing entrepreneurs in their 40s who set up their businesses with an exit date in mind.

In truth, there is no ‘best time’ to sell. We’ve sold business in times of boom and bust, and timing makes very little difference to price.  A good quality business will always be attractive.

Is the market right?

Although our economy may not be in great shape, there’s still a steady stream of international buyers looking to acquire in Hong Kong. In the last two years, around one in every three deals we complete is with an overseas buyer.  China, the US and Taiwan are the most active buyers here, but we are still the ‘gateway’ region for acquirers further afield entering Asia. 

How can I know whether my business will thrive without me?

Make yourself dispensable by reducing dependency on you. Delegate your management team to give yourself the best chance of a clean break after completion if that’s what you’re seeking. It’s also worth thinking like the buyer, who can and will take the reins from day one.

The most important consideration here is to find the right buyer, rather than just take the best price.

How do I plan my exit?

Your post-business plans will be heavily influenced by the terms of any deal to sell up. Yes, there are still cash deals in the market, where you can sign the form and take the money. But increasingly, buyers want comfort and will stage payments over a year or two linked to performance. So you will need to keep an open mind and remain flexible until it all becomes clear in the closing stages of a transaction.

How do I plan my time and finances for this sale?

Selling a business is something most do only once, and challenging to handle while also keeping your business running well. It typically takes 12-18 months to go through the sale process, and in most deals, there will be bumps along the way.

Your accounts, contracts, tax arrangements, certifications will come under scrutiny, so expect to be challenged and be confident on your numbers. The demands of this process can seem intrusive and/or pedantic, but are necessary to give any buyer comfort. Good information systems are the order of the day here, so spend a bit of time organising your data and documents.

High levels of debt in your business will be a concern for a buyer, so take steps to address borrowings and other financial commitments.

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Posted Sep 2016
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