Pursuing Ownership in a Small Business Towards the End of the Financial Year

If you are looking to dive into entrepreneurship and run your own business, you have two choices before you – one, to start the business from scratch – which is the more traditional approach, and two, to buy an existing business – which is the new age mantra for starting a business quickly and easily.

Did you know? Buying an existing business can lead to a better visibility of immediate cash flow, proven financial history which makes it easier to secure loan and investment, established network of customers and suppliers, well-defined market for products and/or services, and an experienced team to rely on.

As a prospective buyer, you may believe that all months of the year are equally important when buying a business, but the truth is that some months of the year are more favorable than others. The last couple of months in a financial year are often believed to be the most favorable months for buying a business.

Let us tell you why?

  1. Visibility of Last Year’s Performance – The potential buyer gets a very good idea about annual sales, operating profit and net profit of the small business being sold. More than three quarters of performance available makes it easy to extrapolate annual financial performance. This also makes it easier to perform due diligence of assets, liabilities and other financial accounts.
  2. Cashflow Overview – Potential buyer has reasonably a good idea about the surplus cash flow that his existing business or profession is likely to generate during the year. Payments related to buying a business can synchronize the timings of cash flow generation and utilization.
  3. Tax Benefits – There are possible tax saving opportunities if a loss-making business is acquired and merged with a profitable business. It becomes easy to quantify possible reduction in tax liability if the loss-making business is acquired towards the end of the financial year.
  4. Motivation of Business Sellers – Business sellers are likely to be more motivated to make a transaction around this time of the year and make a fresh start in the new financial year.

As we draw the curtains on Financial Year 2017-18, it is an excellent opportunity to close a business transaction (Mergers & Acquisitions, Business Exit, Raise funds, Investment Opportunities) that you have been waiting for or to start preparing for a great deal in the next year. Remember, it’s never too late or too early to seize a business opportunity – make the best of your time and resources!

Credit: This article is written by Prof. Mayank Patel, he is the valuation and financial planning expert at team indiabizforsale.com’s advisory service arm. He is a professor at EDI, Gandhinagar. He is also a qualified investment advisor. 
B. E. (Electrical), M.B.A.(Finance), PGD in Treasury & Foreign Exchange Management, CFA(USA).

Avoid These 3 Mistakes When Selling Your Business

“Win or Learn – That Way You Never Lose”

If you are planning to sell your business, and especially if this is your first time, you must be getting a little overwhelmed with all the advice you receive from all corners. Are you wondering if there are any common mistakes that you can avoid? You are right. We have worked with thousands of business owners over the last 5 years and in this post, we share with you the 3 most common mistakes most business owners make when selling a business, and how to avoid them.

  • Not Accounting for Sale Preparation: Even if you are a pro when it comes to selling your products and services, selling your business is not nearly the same and requires extensive preparation, commitment and resources. So, don’t rush into this. Start preparing from day 1 when you decide to sell your business. Depending on the nature and condition of your business, you would need anywhere as the bare minimum time for effective sale preparation up to as much as a couple of years. We have seen business owners being forced to lose clients, accept a lower valuation, lose control of business and go through unwanted frustration –simply because they didn’t give themselves enough time. Our post here tells you how to prepare your business for sale. This preparation includes creation of second line management and delegation of important responsibilities, establishing and consolidating systems, policies and structures, sorting out financial and other documents / records, creating mechanisms to manage existing clients without disrupting long-term contracts, and so on. Then comes the second stage of preparation, when you will have to prepare for pitching to prospective buyers, which encompasses activities like pitch preparation and presentation, preparing for common questions that most buyers ask, compiling documents for primary scrutiny and so on.
  • Poor Choice of Buyer Outreach: How do you attract prospective buyers without upsetting customers and employees? There are two important things to remember here – ‘targeting’ and ‘confidentiality.’
    Many of our users tell us how they wasted precious time and money on ads in newspapers and magazines – without much results. Why? Because ads are less likely to give you the targeted reach that a technology platform like Indiabizforsale.com does. At the end of the day, you will have higher chances of finding a deal on a platform that brings together thousands of buyers, investors and businesses.
    Secondly, it’s best not to give away the identity of yourself or that of your business until a deal is on the table. When you tap into your personal network, chances are that word spreads and reaches your customers too. Our confidential, hassle-free messaging system addresses this problem for our users.
  • Quoting an Unrealistic Valuation: In our experience, unrealistic valuation is one of the primary deal-breakers. Over-pricing your business makes it unattractive to a buyer right at the outset. Not to mention, your integrity becomes a question. Now, many business owners don’t over-price their business intentionally – they simply don’t know the right valuation for their businesses. The way out? Hire an expert valuer who understands your industry. Remember – always opt for a credible valuer with strong track record. At Indiabizforsale.com, for example, we have an independent valuation expert with over a decade of experience and strong professional credibility, who helps businesses with detailed valuation reports as a value-added-service (know more).

So, what are you waiting for? Start preparing to sell your business and stay tuned to our blogs and other resources to help you along the way.

Should I Use a Consultant to Sell my Business?

“Do What You Do Best – Outsource the Rest”

Every business owner looking to sell his business has asked himself this question at some point or the other. If you are wondering how we know this, it’s because we have worked closely with thousands of business sellers over the last few years. So, who are consultants? In simple terms, consultants are deal experts, who can help with industry-specific deal sourcing, legal implications, taxation, accounting and negotiation. Finding a serious buyer is a tedious task especially while you are still running your business. Hiring a consultant can free your time to concentrate on managing the business while the consultant would plan and implement the necessary leg-work for your deal.

Primarily, a deal consultant helps both business buyers and business sellers with deal sourcing, i.e. discovering prospects based on preferences. But how do you decide whether to hire a consultant or not? We are here to help you out – we have listed down a few factors for you to keep in mind when deciding whether to hire a consultant or not.

  • Deal Value

This refers to the price or the price range at which your business is expected to be sold. While there is no hard and fast rule – it is believed that for deals below INR 5 Cr. it might not be worthwhile to hire a consultant. This is because the consultancy fees might prove to be too much with respect to the deal value. Consultants usually charge a percentage of the deal value as a commission and a retainer fee in some cases. 

Wondering what the approximate deal value could be for your business? Our blog here tells you everything you need to know about business valuation.

If you are in a niche industry and have no other way of sourcing buyers but to hire a consultant to manage your deal, it might be worth loosening your purse strings. However, if sourcing buyers is your only concern, you could try listing your business at Indiabizforsale.com first and explore the inquiries you receive.

  • Your Experience

If you have prior experience of selling one or more businesses (either your own venture or a business owned by somebody else), or if you are a deal professional with expertise in closing business sale deals, you might not need a consultant. However, it might be useful to note that if you have not sold a business recently, the past experience may not necessarily or fully help you in selling your current business, as the industry standards could have changed, applicable compliance provisions could have altered, and you might not be fully aware of those.

If you are selling a business for the first time, these top 5 tips can make your life easier.

  • Availability of Consultants

Availability of consultants is another important aspect to be considered. As a matter of fact, good consultants with a proven track record and necessary industry exposure are often not easily available. A tested way to source good consultants is to request recommendations and references of professionals in your network whom you trust – but unless you belong to the business buy / sale network, it is unlikely that you will receive a lot of good recommendations.

We hope that this article helped clear the air about how to go about deciding if you need a deal consultant. In the end, whether you choose to hire a consultant or not, both the decisions will involve a few risks. Focus on considering which scenario is more suitable for you.

To know more about how to go about selling your business, stay tuned to our blog and other resources. Feel free to write explore IndiaBizforSale.com.

Top 5 Things to Do to Sell Your Business Quickly

“A ship in harbour is safe, but that is not what ships are built for.”

-John A. Shedd

Are you a business owner looking to sell your business? Are you searching for the best tips to make it happen?

Then, you are at the right place. Indiabizforsale.com has helped thousands of business owners, business buyers and investors in buying, selling and growing businesses as well as in investments and fund-raise for businesses. By working closely with our users and having closed numerous deals, we are in the best position to share with you the top 5 things you should start doing right away to sell your business quickly. Here are our top picks for you:

  • Organize Your Business Information: The first thing you must do is compile, assimilate and sort all the pieces of business information together and categorizing them for easy access and retrieval. Make sure you have audited financial statements in place at least for the last 3 years (if applicable), put together your business policy documents, receipts, invoices, appointment letters, contracts, past deal documents, agreements, intellectual property documents, technology specifications, market research reports, and so on. You will be surprised by how much time you save when buyers actually start seeking these information from you.
  • Polish Your Business Pitch: Did you know? For most sellers, the toughest questions to answer are: “Why do you want to sell your business?” and “Why should I buy your business?” Communicate the answers honestly but intelligently and try to establish the fact that your business is a viable proposition to buy. A common misconception is that only profitable businesses are viable opportunities, but you will be surprised to know that there are many takers even for sick businesses with future potential. Know more about how to sell your sick business.
  • Make Some Noise: This is a no-brainer. No one will buy your business if they are not aware that it is up for sale in the first place. You can reach out to your personal and professional networks, or post classified ads in newspapers, magazines, trade journals and directories. However, remember that by adopting these conventional approaches, maintaining confidentiality of yourself / your business might be at risk, and this might harm your business in the long run. The best option is to list your business for sale with technology platforms that assure anonymity, such as Indiabizforsale.com – India’s most preferred network to buy, sell, fund and grow businesses.
  • Hire a Consultant: If your business is in a niche industry, or if you are looking to sell your business urgently, hiring a consultant with good track record and credibility in your industry or related industries is a good option. It is often difficult to assess the credibility of a consultant. Getting references from your network as well as consulting multiple resources before choosing the right one is the best way to go.
  • Qualify Buyer Inquiries: We have seen many sellers wasting their precious time on buyers who are not really interested in buying their businesses. Not only does it slow-down the process, but also there’s a risk of critical information of your business reaching the wrong people. Qualify buyers in terms of their interest in your businesses, and only share critical information if you think that the buyer is serious about your business. You can also request the buyer to sign a Non-Disclosure agreement (NDA) before sharing sensitive information. Read NDA and 3 Other Deal Documents You Should Know About. Optimize the time you spend on a buyer by sharing information in a compact and step-by-step manner, and keep track of the discussion progress. Don’t be afraid to ask your own questions to get clarity about the buyer.

When it comes to selling a business, keeping the momentum high and maximizing your reach is more important than anything else. At Indiabizforsale.com, we are committed to making deal-discovery a seamless experience for all. Stay tuned to our blog for more useful articles like this, and explore our website for more.

How to Prepare Your Business for Sale and Why You Should Start Now

As the owner of a small business, this might be the first time you are considering selling your business. It is natural for you to feel overwhelmed and wonder how to sell your small business. We have worked closely with thousands of business owners like you over the last few years, and understand where you are coming from. Serious business sellers often ask the question – How can I prepare my business for sale? Hence, we thought of sharing our experience in this article along with a few expert tips that can help you with sale preparation. 

Why Should You Prepare Your Business for Sale?

Preparation is an important step in the process of selling your business. The key benefit of sale preparation is that it helps you take stock of your business and review it with a fresh eye. Sometimes, as a business owner, you tend to get so involved in the day-to-day affairs of the business that you barely get time to take a hard look at how things stand, and consider things as objectively as possible. Sale preparation can help you do that.

Secondly, good sale preparation can help you create a great first impression on prospective buyers. Having your books of accounts in order, sorting your key business documents, reviewing your internal systems, and doing organizational improvements can go a long way in smoothening the sale journey for you. We have seen many situations where efforts made on sale preparation even led to better valuation – for example, a staffing solutions company spent a year on fixing its organization structure issues and eventually received a valuation that was very close to the owners’ asking price.

What Does the Process of Sale Preparation Entail?

While there are no hard-and-fast rules about how to prepare your business for sale, we advise that you take a methodical approach to it. You can start by getting together your key team members, preferably from different functional areas such as marketing, distribution, finance and accounts, product development, human resources and so on. Seek their objective view on how things stand and what you can do as a team to make things better.

If the exercise starts to get too overwhelming, take a time-based approach – what can you and your team do in the next 1 month? 3 months? 6 months? Who will be responsible for executing each of the key improvement areas? Who will they be accountable to? Keep an eye on the on-going affairs of the business too – this exercise should not disrupt your usual business as far as possible. Monitor the results of sale preparation periodically and make sure your team members take it seriously.

How Long Will It Take to Prepare Your Business for Sale?

The duration of sale preparation is again a matter of your judgment. Technically speaking, it is a function of two parameters:

a) How much improvement do you want to make in your business?

b) By when do you want to sell your business?

Goes without saying, the more improvements you want to make, the more time will be required. As an entrepreneur, it is important you distinguish the critical aspects from the less important ones. For example, having the books of accounts in shape is a top priority for most buyers.

Secondly, keep an eye on your timeline goals for selling your business. For example, if you must sell your business in a year, you cannot spend more than 6-8 months on preparing your business.

When Should You Start Preparing Your Business for Sale?

The answer is – now!

Yes, if you are seriously considering selling your business, you should start sale preparation right away. There is no good time to start. The earlier you start, the more prepared you will be at the time of handling buyer inquiries, and the more advantage you will have. You will also be able to take stock of things better and get an objective view of where your business stands as of now, and how much can be done in what time. The more you delay, the more you will lose out – one of the common mistakes that sellers make.

So, what are you waiting for? Now that you know how to prepare your business for sale, go for it! At IndiaBizForSale.com, we help thousands of business sellers make their businesses more saleable and connect with matching buyers quickly. To know more about what we do and how we can help you, write to us at [email protected].

Selling a Business on Your Own vs. Using a Consultant – How to Decide?

The decision to sell your business can be overwhelming. As David Allen says, “You can do anything, but not everything.” Luckily there are professionals available for help – popularly known as brokers or deal consultants. So, who are consultants? They are deal experts, usually with multi-disciplinary expertise in one or more of the following areas: law, taxation, economics, marketing, accounting, finance and negotiation.

A deal consultant is primarily responsible for deal sourcing – i.e. enabling prospective buyers and sellers discover each other and carrying out match-making between buyers and sellers based on their preferences. In order to ensure a smooth transaction, the consultant stays tuned to his preferred industries and domains, specifically around the do’s, don’ts, and the compliance considerations in a deal. Sometimes deal consultants also help with legal advice, taxation strategy, pricing and valuation.

Should you hire a consultant for selling your small business? It depends on several factors, which are discussed below.

  1. What is the deal-size of your transaction?

Deal size is one of the primary considerations in hiring a consultant. Deal size or deal value refers to the price for which your business will be sold. While there is no hard and fast rule, in general if the deal size is below INR 50 lakhs, it might be difficult for you to find quality consultants who are interested in it, or even if you find one, their rates might prove to be too high relative to the deal size. However, if you are convinced that you absolutely need a consultant to manage your deal, it might be worth loosening your purse strings.

  1. Is the deal in a niche industry?

Do you belong to an industry which is niche, and hence finding buyers and managing deal compliance is challenging? In such a situation, having a consultant on board is often the best way to go about it. Remember to hire a consultant with experience and knowledge in your specific industry and make sure that he has a proven track record of managing deals of your size. It is possible that you may need a consultant only to source a buyer and not for managing the deal, in that case you can also onboard consultants at more affordable rates.

  1. Do you have any experience and / or expertise in selling a business?

Are you a pro-seller with experience of selling one or more businesses, or are you a deal professional yourself? In that case, you will probably not need a consultant. However, remember that your expertise of selling a business in the past may not necessarily help you in selling your current business, as industry standards may differ widely and applicable compliance provisions are updated periodically, which you may not be aware of.

  1. Are any good consultants accessible to you at affordable rates?

Availability of consultants is a key factor. Good consultants who have a proven track record, are professionally qualified, and have adequate industry exposure, are hard to find. A reliable way is to go by recommendations and references of people in your network. A consultant’s charges should also be affordable with regard to the deal size you are looking at, making it even harder to spot useful consultants.

  1. Do you necessarily need a consultant for managing the entire deal?

Sometimes it is possible to cut corners and have a consultant who takes care of a few critical areas instead of the entire deal. For example, you may hire consultant to do any one or only a few of the following: source a buyer, negotiate a deal, valuation, compliance, taxation, etc.

The idea here is that instead of hiring a consultant for managing the entire deal at exorbitant rates, you can allocate specific functions to the consultant, and save on time and resources instead.

At IndiaBizForSale.com, we help sellers and buyers connect to consultants for securing deal services, and also have an in-house team to help with the overall deal management. To know more about what we do and how we can help you, please contact us here.

How to Sell Your Sick Business?

Who said exit is only for the chosen few?

Businesses thrive, and businesses sink. Like people, enterprises too go through good times and bad. Competition, changing consumer preferences, other market actors, cash flow dry-up, or simply an unforeseen circumstance might have brought you to the point where things aren’t working for your venture any more. So, what do you do? Do you shut shop, liquidate your assets, and file for bankruptcy? Sure, that’s an option too. But, did you consider selling your sick business instead?

Just because you think you might not be able to pull it through much longer, does not necessarily mean that your business isn’t valuable. And it definitely does not mean that no one else will be interested in your business! While it may seem unlikely to you, there are buyers – individuals and enterprises – out there looking to acquire troubled businesses, and may be even pay a fair price for it.

So how do you go about selling your sick business?

  1. Diagnose and Accept the Actual State of Your Business – Often, the first step to accepting the current state of your business is to diagnose its problems accurately – sit with your partners, ask your key employees and consult your cherished customers. Do you know, many businesses carried out this exercise only to feel motivated to give it another shot? Even if you don’t feel that way – it’s ok. Just begin with the objective of getting to know what exactly is the problem with your venture.
  1. Look for Ways to Make Your Business More Saleable – What are those handful of things you could do right away to make your business more saleable? Identify the quick-fixes that can be readily brought in, and see to it that these are implemented. Simple changes like improved hygiene, better records and documentation, having efficient systems in place, activating quality controls, etc. can go a long way in putting your business in a better position to sell!
  1. Create a Turn-Around Strategy for Your Future Buyer – Think about it, why would anyone buy a business that’s not doing well presently? It’s only because they hope to do something better out of it in the future. Put your thoughts in that direction – your buyers will care about you if you care about them. What are the ways in which a potential buyer can revive your business? Under what conditions? Is there a specific set of buyers who will be able to do this better – for example a buyer with better distribution coverage, or a buyer in a complementary business?
  1. Get a Fair Valuation for Business – It is extremely important that you ballpark a range for fair valuation of your business. Just because you have not been thriving lately, doesn’t mean your business is not worth its salt! Also, by having a fair valuation in place, you will have realistic expectations about what price you can expect from a prospective buyer.
  1. Look for Potential Buyers – Now that you are ready to begin the selling process, you can list your sick business for sale both online and offline. Remember – do not share the identity of your business or your own identity anywhere! However, you can share the basic details such as the industry, location, products, along with a few words on the current state of your business. Remember, that you might have to be patient for inquiries to come in.
  1. Come Clean, But Don’t Settle for Less – It is important that you communicate the condition of your business clearly and completely to a potential buyer. If the buyer expresses further interest, you can share the turn-around strategy with him as well, to help him make informed decisions and to improve the chances of closing the deal. However, you need not settle for less than your fair valuation, unless you want to exit immediately at any price.

If you have a sick business or know someone who has a sick business, you now know how to go about selling a sick business. This article has been brought to you by IndiaBizforSale.com – the most preferred network to buy, sell, fund and grow businesses in India. If you have a question to ask or want to know more about what we do, please contact us on [email protected]

Want to Sell a Business in India? – Get Started Today!

You have a business and want to sell it – how do you go about it?

Things are usually harder on this side of the table, i.e. when you are the seller of a business. Why? Simply because the onus is on you to get noticed, prove your worth to a buyer and go through the rigour as he deems fit.

As a leading digital platform for matchmaking between buyers and sellers of businesses in India, we can tell you this – you are not alone. IndiaBizforSale is an online platform for buying and selling businesses, and providing services to facilitate the transaction for both buyers and sellers. This article is a baby step towards giving you a drift of what it truly means to sell a business, and how we can help! Continue reading “Want to Sell a Business in India? – Get Started Today!”

Buying and Selling Business: Connections Made Easier

Newsletter Issue 41
September 2016
 
Still looking for the right buyer / investor?
Finding the right buyer for your business and getting connected with him can be a painstaking and tiring task, especially when you are trying to sell your business while keeping it confidential.

Now we are offering you a quick and easy way to connect with our registered and curated buyers.

Connecting Businesses with Opportunities

Newsletter Issue 34

February 2016

BizNews: Your Monthly Refresher for Buying and Selling of Business in India

Connecting Businesses with Opportunities
The idea of looking to buy a business starts by finding and connecting with the right opportunity at the right time. Most aspiring investors put a lot of effort into choosing the right business they are looking to acquire. In our experience, it stands true that an organised approach will help you find the right business.

Let us help you in connecting with the right Business Opportunities for Investment in India.

Continue reading “Connecting Businesses with Opportunities”