SELLING YOUR BUSINESS IN SOUTH AFRICA
- Important information on selling your business
- Preparing to sell your business
- Stages of the business sale transaction
Important information on selling your business
When is the best time to sell my business?
The best time to sell is when a business is doing well. When you wait until the business has peaked the selling price will suffer. However, almost any business can be sold, even if it is not doing well, if the sale is handled professionally and priced correctly.
How much is my business worth?
The businesses' value depends on many factors. This include cash flow, asset values, financial history, condition of equipment and premises, favorable lease terms, competition, location, the economy and, of course, return on investment. By analyzing your business for sale and comparable sales in your industry, we can advise you on the proper pricing strategy for your business. For larger businesses we recommend and will pay subject to terms and conditions for a third party valuation. Buyers pay more for a business when documented evidence supports the asking price. This is also important for financial institutions in giving finance.
Why not sell the business myself?
Most owners find that the frustration, expense and time involved do not yield cost savings and many end up working with unqualified buyers. In fact, because they do not have access to a large number of qualified buyers, many owners end up selling their business for much less than they could have received by working with a well-established Intermediary. Business owners also find it difficult to work directly with buyers while maintaining confidentiality. Selling a business is a specialised trade. Seek professional assistance when it comes to selling an asset as valuable as your business.
Why use a full-time professional business broker?
Sellers benefit in various ways. The more significant benefits include the ability to spend their time managing their business during the selling process, thereby keeping their net profit up and maintaining the maximum sales price; the ability to maintain confidentiality about the sale therefore not alarming client bases, employees and suppliers, or giving a market advantage to a competitor; step-by-step guidance through the selling process and, probably the largest benefit, is normally a significantly higher selling price.
Prepare to sell your business
All businesses for sale have buyers, notwithstanding the position, price or current financial standing of the business. Below is some guidance to expedite the sale of your business:
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1. A Good Reason why you sell your business This is the one question you will always be asked. Buyers are always concerned about why the current owner is selling the business. They are afraid you may be selling your business because of an undisclosed fact that may hurt the business in the future. Buyers must see a logical reason for the sale of your business and without it they will assume that you are hiding facts of material importance. Reasons for selling a business normally includes retirement, partnership disputes, personal relocation, family concerns, the desire for change, illness or to entering another business venture. |
2. Provable books and verifiable records increases the number of potential buyers of your business Buyers of a business for sale want proof of the financial standing of the business over the past years. |
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3. Selling price The asking price of a business for sale must be competitive. There are certain rules of thumb in the market place to value a business. However, supply and demand will normally determine the selling price and determine the fair market value of your business for sale. |
4. Professional Valuation Sellers of a business for sale that use a third party evaluation have an 80% chance of selling their business at a much higher price. Pricing too low costs you money. Overpricing will lose you the sale of your business. Valuating the business for sale creates a document that proves value to the buyer and shows the business to be competitively priced. |
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5. The Lease Buyers of a business for sale will need a good lease, albeit the existing lease assigned or a new lease. |
6. List of fixed assets Buyers of a business for sale will want a complete list of fixed assets, such as equipment, equipment and fixtures. Serious buyers will inspect this to ensure that everything is in good working order. |
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7. Take care of the Appearance Businesses for sale with a good appearance sell faster. Buyers of a business for sale deduct substantial amounts from their initial offering price for businesses that are not in good condition. The business premise must be neat, clean and in good repair. |
8. Restraint of trade Buyers are concerned you may go into competition with them and take back all their customers. A promise not to compete within an appropriate distance and time period is normal in a business sale agreement. |
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9. Time is of the essence Be prepared to move forward when a qualified buyer shows interest in the business. |
Stages of the business sale transaction
Mandate
Sale of business transactions in South Africa are governed by various fiscal laws and regulations. A business broker must have a Fidelity Fund Certificate and must have a mandate before proceeding with the marketing of your business. In the absence thereof, the Business Broker contravenes the law and is subject to sanction. See Biztrader Documents Library.
Valuation
We will analyse your business for sale and suggest a realistic price and terms for the sale. For a larger or specialized business for sale, we agree subject to terms and conditions to carry the cost of a third part valuation.
Advertising
We advertise your business for sale to get the highest possible response and the greatest numbers of potential business buyers. Our advertising is local, national and international to ensure maximum exposure. We also undertake niche advertising of certain businesses for sale as well as introduce the business for sale to qualified buyers on our database.
Screening
We interview buyers to eliminate those who are unable or not ready to purchase your business for sale at this time.
Introduction
We present your business for sale to qualified potential business buyers. We discuss the various components and benefits of the business with the potential buyer.
Meeting
We normally arrange a meeting with you and the potential business buyer to prove the buyer's interest and give an opportunity to learn more about the business for sale.
Financing
We will assist the buyer of the business for sale to obtain any required financing.
Offer to Purchase
We assist with the drafting of an offer to purchase. This includes encouraging buyers to write a fair offer accompanied with an earnest money deposit check.
Present Offer
We present the offer to purchase the business for sale to you. We will now also provide background information on the buyer and explain the buyers reasoning behind the offer.
Explanation
We explain the terms and conditions of the offer to you.
Acceptance of Offer
You may accept the offer as presented or you may use our knowledge and experience to structure a counter offer.
Mutual acceptance
We use our experience, training, negotiating skills and expertise in buying and selling a business to create a mutually acceptable agreement. This normally serves as contingent purchase and sale agreement.
Due Diligence
Nearly all offers are contingent upon the buyer's inspection and approval of all aspects of the business for sale including financial records. The handling of due diligence is the most important step in the process of a successful sale. The buyer of your business must be satisfied that your business is legal.
Contingency Removal
The business buyer needs to remove all the contingencies, such as obtaining finance, for the agreement to become a binding offer for purchase and sale.
Lease assignment
We assist the buyer to obtain a lease assignment or new lease.
Closing Preparation
We assist the closing of the business for sale transaction by dealing with any relevant outstanding matters.
Completion of sale
We assist with the many details required for a smooth transfer of possession of the business for sale.
