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Selling up? Prepare for success
Licensees seeking to sell up and move on will instruct their business transfer agent to seek the best price for their business. All potential purchasers will want to know the financial health of the business and, to achieve that, will need to see up-to-date accounts, rather than historical figures. And just as vendors will seek to achieve the best price from the sale, purchasers will demand access to full trading information prior to making an offer.
Suzanne Lawrie advises openness and detailed preparations for selling your business in advance of placing it on the market…
Providing as much information as possible can only benefit the vendor, as failure to do so could delay a sale and risk losing a genuine sales opportunity. It is, after all, down to the vendor to drive forward the sale and that can only be achieved by having all the relevant particulars of the business to hand.
If for some reason the most up-to-date accounts are not available, then the vendor's accountant can be of great assistance. The preparation of a certificate of turnover, or copy VAT returns or indeed draft accounts are often the difference between success and failure in a marketing campaign.
Going to the market with accounts which are clearly historic tends to breed suspicion among potential buyers. Such circumstances can lead to a reduction in sale prospects and, perhaps more importantly, on the business's value in the opinion of the purchaser's surveyor.
In such circumstances, an experienced business valuer will make his valuation conditional upon the missing information being produced, and there being no significant variation in trade in the interim period. This covers the valuer for occasions when the accounts are subsequently produced at a later stage in the deal, and there has been a clear fall in turnover and profitability. In such circumstances, the valuer is entitled to amend his opinion.
On being instructed to value a business as a trading entity, a reputable business valuer would request current financial information, as well as asking to view other important documentation such as the license, the Fire Certificate and/or plans and planning consents for any recent alterations.
If you are aware that there are unauthorised alterations, these will become an issue in their own right and a potential deal-breaker. It is possible, however, to obtain retrospective consent from the Local Authority and in some cases, a letter of comfort is sufficient to satisfy the various solicitors who become involved.
Furthermore, if the vendor has undertaken significant repairs to the premises, such as renewal of flat roofs or treatment of timber decay and rot, then guarantees and other such documentation also should also be made available for the valuer.
Value is affected by essential repairing liabilities, and the surveyor may request that further investigations and estimates are prepared.
Vendors who are able to get their businesses in order at the outset stand a far greater chance of sealing a deal within a reasonable timescale. If relevant documentation is not forthcoming, however, the prospective purchaser may walk away, with many people viewing such a lack of information as suspicious.
If in doubt, seek legal advice from a reputable business transfer agent and a specialist valuer.
Suzanne Lawrie
Head of Business Sales
DM Hall Chartered Surveyors
This article has been edited from its original version. For the complete feature please see Catering in Scotland magazine September/October 2006.
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