Let it all hang out!
Monday, February 26, 2007/
If you want to sell your business, you need to let the market know it’s available. By ANDREW KENT
By Andrew Kent
The buying and selling of privately owned businesses in Australia has often been referred to as the hidden market. Historically, businesses have been very reluctant to reveal that they are for sale, keeping a trillion dollar market hidden from view.
But this is starting to change.
With a growing number of businesses coming on to the market as the baby boomer generation heads toward retirement, businesses are taking a far more open approach to selling. In particular, they are providing things like turnover, EBIT, and asking price to the market.
The reasons for this are two-fold. First, online markets like BizExchange require this information. Second, there is a growing awareness that buyers need to be enticed and a key way of doing this is to provide more information. Quite simply, providing more information generates a greater number of genuine inquiries.
Although there are still concerns among businesses that customers may be deterred, or competitors may take advantage if the business is known to be for sale, this can be managed by the appropriate use of a business broker or adviser to handle any inquiries.
The business’s identity can be withheld until an inquiry is known to be genuine, while the fundamentals of the business opportunity can be widely promoted to potential buyers.
Concern around the reaction of related parties may also be overrated. There is a growing acceptance that every business is for sale at the right price. Add to this the fact that your staff, suppliers, customers and competitors are some of the most likely potential buyers, there is no reason that their inquiries cannot be given due consideration by your adviser.
Take the following example of a business for sale:
Value-for-money home builder targeting the second homebuyers market. Provides a high-quality service together with a range of affordable and attractive homes, servicing Melbourne and Adelaide metropolitan areas and their surrounds. Already established as one of the top builders in Victoria.
Turnover range: $50,000,000 +
EBIT range: $2,000,000+
Industry: Construction > General construction > Building construction > House construction
Years in business: 15
Sale/investment terms: Owner prepared to assist with transition
Selling price: $20,000,000 to $50,000,000
Although some of the competitors operating in the industry may be able to identify the business concerned, potential buyers outside the industry or looking to expand into the markets in which it operates are given sufficient information to warrant proceeding.
The need to provide at least this level of information is even greater for businesses looking for partial sales or equity-raising.
If you are concerned about market perception when putting your business on the market, remember that more than 90% of business owners would sell if they received the right offer, and less than 5% are ever approached.
Quite simply, if you don’t advertise your business for sale, you won’t sell it.