Steps 7 & 8 of 10 on how to prepare for a successful business sale

7. How to approach staff, customers and suppliers

Here are some tips about navigating issues that may arise with your staff, customers and suppliers you put your business on the market.

Staff

Is my job secure? Staff worry about the future security of their job. Being honest will greatly enhance your ability to keep your staff engaged. Remember - business as usual! Continue to maintain and grow the business with your staff, while the sale process happens on the side.

If you are just testing the waters: Initially list SILENTLY OR UNBRANDED and keep it to yourself. Buyers and or others coming in should be aware not to talk to the staff or associates directly. When the time is right, you can proceed to below.

If you plan on BRANDED advertisement and have a small team: Be honest with your staff and explain your reason for selling/leaving. It’s important that they are reassured that a new owner will secure their future and give them greater ability to progress in their career with the business. Give them a future! 

 

It is not uncommon for a staff member to express their interest in purchasing the business If this occurs, engage your broker to negotiate the sale and settle the business for you.

 

If you plan on BRANDED advertisement and have a larger team: Apply the above to the key staff because they are one of the biggest assets in your sale offering. Make them feel secure. Reassure them that you will be looking for an owner who can give them further career opportunities. 

 

Customers

It is not usually recommended to broadcast to your customers that you are for sale, as it may trigger them to look for a new supplier. 

 

Customers can become a buyer, especially if you are a strategic supplier to them.

• This is unlikely if you are a retail outlet as long as you are delivering the same service and or product as usual. 
• Sometimes vendors put up a sign to say the business is for sale. We usually avoid this for metro areas but in rural areas a sign can assist in a `reactive sale’ 

Suppliers

Most suppliers won’t care too much if you are selling your business while you continue to spend money and pay your bills.

• Your biggest suppliers can sometimes be a buyer
• It is worth giving your broker a list of your suppliers to identify any that may be interested in a strategic purchase

8. Sale offers

• How to screen prospective buyers
• What to do when you’re waiting
• What does a good offer look like?

How do brokers screen prospective buyers?

Brokers filter the enquirers. It can take 20-30 enquiries to find one suitable buyer for a business. 

Step 1:  Complete an NDA (Non-Disclosure Agreement)

Step 2: Provide them with a snapshot via your business profile or Information Memorandum

Step 3: Once a buyer has received this, we spend time discussing the business and their needs to gain a better understanding of the buyer’s requirements, reason for purchasing and financial capacity to purchase

Step 4: Supply the remaining buyers with further information about your business, such as your lease schedules, specific financial information and staff structures etc. 

Step 5: It’s time to meet! This is the time for the buyer to ask any further operational questions or specifics of the vendor 

What to do you’re waiting for a buyer?

Don’t let your business slide! You are on the market. You are not under contract and have not yet sold.

 

Use your time wisely as you don’t know how quickly (or slowly) your business will sell: Continue to run your business with a focus on increasing sales and profits.

 

Use the time to: 

• Clean up or fix anything your broker has pointed out
• Write or review your procedure manuals and train your staff so your handover time is reduced
• Ensure your customers are happy and that you are listening to their needs
• Look through your expenses and renegotiate deals to keep your costs down
• Look for ways to streamline processes and increase your business productivity

What does a good offer look like?

Receiving your first offer is always exciting. Remember - an offer is not a sale contract and negotiations may still take place. It is a lot easier and cheaper to discuss and make any changes before lawyers are engaged. 

 

The price should be within or greater than your ideal `Need Price’ so you can gain an acceptable level of `Nett Cash Out’ 

 

The conditions allow you to achieve your desired exit from the business. The most common conditions include:

• Lease reassignment 
• Training / Handover 
• Employment agreements
• Satisfactory Due Diligence 
• Subject to Finance 
• Vendor finance
• Restraint Period and Area 
• Key Staff employment
• Subject to Sale 
• Payment Conditions 
• Specific Conditions 

 

Once an offer is accepted, it is not a given that the business will settle. The business is only sold once the money is in your account and you have handed over the keys!