[00:00:00] Fiona Johnston
Have you ever thought about selling your business eventually? Awesome. This episode is for you, and what I wanna talk about today is how to actually do that. Selling the business, it's not gonna happen as fast as you imagine it to be. Often, the process of selling a business is actually harder than growing it and maintaining it. So just be prepared that from an emotional and energy perspective, selling a business, just like raising capital, can be a really difficult, long process.
Money Secrets intro
Are you a small business owner who'd love to be making more money while making positive change in the world? You're in the right place, friend. Hi, I'm Fi Johnston, a chartered accountant and money coach obsessed with small business. In The Money Secrets podcast, I share strategies that you can use to make more money without working harder. You'll hear successful small business owners share what they've learned about money and business, and I'll help you to think differently and shift your [00:01:00] perspectives about money so you can grow your business and your impact.My mission is to get more money into the hands of good business owners like you.
Acknowledgement of Country
This podcast episode was recorded on the lands of the Wurundjeri people of the Kulin Nation, and I'd like to acknowledge them as the traditional owners and custodians of this land and water that I live, work, and play on. I'd like to pay respects to elders both past and present, and note that sovereignty has never been ceded. This always was and always will be Aboriginal and Torres Strait Islander land.
Fi
So I'm a chartered accountant, and I have helped lots of businesses to prepare themselves for sale. In case we don't know each other already, I'm Fi Johnston. I'm a chartered accountant. I've worked with small businesses for 25 years. And so when I'm talking about money, I believe that my advice is sound.[00:02:00]
So let's talk about selling your business. Okay, first of all, selling your business is much harder than you think it is. Often the process of selling your business, even if it is a really appealing, valuable, great opportunity, it will still take a long time. So if you are seeing exiting your business as being the solution to the overwhelm you are feeling or, you know, just wanting to get out because it all feels too much, selling the business, it's not gonna happen as fast as you imagine it to be.
And actually, often the process of selling a business is actually harder than growing it and, um, maintaining it. So just be prepared that from an emotional and energy perspective, selling a business, just like raising capital, can be a really difficult, long process. So the next thing to think about is that even though you think your business is amazing, and [00:03:00] I am sure that it is, the person who is buying the business from you has a very different perspective from you.
One of the things that is most important to a potential purchaser is the profitability of your business. And what will make your business more valuable is not just being profitable, but being consistently profitable. So if you are looking at your profit and loss report, and you are seeing one year very profitable, next year not profitable, the one after that very profitable, that's not appealing to somebody wanting to buy your business Because it indicates that there's some level of unpredictability.
So yeah, the first thing that a buyer is going to be looking for is the profitability of your business and the profitability over the long term. The next thing that a purchaser will be looking at is what assets exist here. [00:04:00] Is there a really recognizable brand? Is there a fantastic website? Are there processes that are incredible that I will be purchasing when I buy this business?
Is there a loyal social media following? Are there contracts in place with your customers for future revenue? Are there physical assets, like plant and equipment, stock, fit out, those sorts of things? So what assets am I actually buying when I buy this business? They're also gonna wanna look at things like what liabilities exist here.
For example, do I need to take on the existing staff of this business? And do I want to? Is there a lease in place that I'm expected to take on as part of this business purchase? Now, the lease [00:05:00] can be a bit of a sticking point, and I don't wanna get too much into the semantics, but the purchaser of your business may not want to also take over the lease.
So that's something for you to consider. What would I do if I sold my business, but I didn't on-sell the lease? So that might leave you with a lease for a business that you no longer own. So what are the liabilities here? What are the risks? Are there things lurking in the background that I'm unaware of?
So are there kind of legal issues? Is there a product issue? Is there something that this potential person I'm purchasing this business from hasn't told me? So they'll be on the lookout for signs that, you know, there might be any kind of an issue going on with your customers or your product range or any kind of legal issues that have kind of come up The other thing that they're really gonna be looking at is, like, how does this business operate without this founder?[00:06:00]
Are there people who work in this organization who can actually run the business? So what happens when this founder decides to leave? Will all of the clients also leave? Will people not want to purchase those products from us anymore? Will they want to continue to work with us as the new owners of this business?
So if you are buying a service-based business, like an accounting firm or a marketing agency or a pest control business, the clients of that business don't have to become your clients, unless there's a contract in place, of course, which is why that's one of the things that a purchaser will be looking for.
But there's a big risk for the potential new owner of the business that the clients that you currently have won't become their clients. So from the perspective of the buyer of your business, they're looking for profitability, they're looking at what [00:07:00] assets are here, they're looking for what processes exist and, you know, what happens when this founder leaves.
Is there still a business left here?
Good Money Club AD
I'm gonna guess that you are a small business owner who really cares about making money and impact. Me too. It's why I designed Good Money Club, which is a place for female small business owners to come together and learn about financial literacy, how to make and manage more money, and how to think differently about money so that you get different results.
We talk about money every single week, and I promise you, it doesn't feel gross. The more you learn about money, the more you immerse yourself into the kind of strategies that work for small business owners. You are gonna see yourself feel calm with money, and that is gonna lead to you making more revenue, paying yourself more, and really [00:08:00] thinking about money in a whole different way that feels good. Check out the link in the show notes to find out more about Good Money Club, and we would love to have you in there.
So if you wanted to prepare your business for sale, you would be doing things like looking at your profitability. Are your prices set at the right amount to actually allow your business to be profitable?
Are you generating positive cash flow? If not, how do we change that? Do we need to be bringing in more revenue? Do we need to increase our prices? Do we need to decrease the amount we're spending on X, Y, or Z? Are we over-servicing our customers, and we need to decrease the cost of delivery so that we can bring in more revenue without more costs?
You might also start thinking about, okay, if I wasn't here, how would my business run? So you would [00:09:00] start thinking about different processes, systems, tech, software. What are the things that you could build into your business that would allow it to run without you, or at least to run to some degree without you?
You might also be looking at things like, what assets do exist in my business? Is my brand actually strong? If I asked an ideal client about my brand, would they actually know anything about it? So you might wanna be looking at things like your website, your copy, your logo, your visual brand, your photography, your videography.
You wanna look at your social media. Do we have an engaged community here? Do we have an engaged email list? If not, let's bloody fix that, right? Let's make sure that we are treating all of the different parts of your business like the assets that they are. Are we actually taking care of our email list, our Instagram?
Are we, you know, really thinking about [00:10:00] the value that we can generate through our brand when we actually invest time and money into it We're thinking about how does this business operate without me? Do I need to employ somebody whose role is to run the business? Or is there somebody that I can train up within the team to start taking on some of the work that I currently do?
So while you're working on all of this, you're thinking about, okay, I'd like to sell my business in the future, so what I'm doing is I'm working on my profitability, which might be about your revenue, it might be about your costs. So you've built up stronger profitability. You're building up stronger positive cashflow because you've worked on your pricing and the financial aspect of your business.
You've looked at the assets in your business, and you are trying to really make use of them. So are we actually nurturing the community [00:11:00] that we already have? Are we investing in our brand? Do we have systems and processes and structure in this business that make it easier to run even when I'm not here?
So now you have a business that is really appealing to a potential purchaser, but guess what? It's really appealing to you, too. So this is the thing that I find so fascinating is often we don't start working on these things unless we're thinking about it from the perspective of exiting our business. So what you might find through the process of working on your business like you are trying to sell it is that you actually end up with a business that you want to keep.
It's profitable. It has positive cashflow. There's great people working there. Your community, your marketing, your customers are well taken care of, and they are repeat purchasers. You have built a business [00:12:00] that anybody would want to keep. So I suppose the point of this episode is to really think about why am I creating this incredible business only in the event that I'm planning to exit?
Because most of the things that make your business valuable to a potential purchaser also make it more valuable to you.
Outro
Thank you so much for listening right up to the end. I hope you enjoyed this episode of Money Secrets where we talk about the money secrets of successful small business owners. If you enjoyed the episode, I'd love it if you'd subscribe to the podcast, but leave us a review or share this episode with one of your friends.
I hope you learned something. I hope you got a new perspective, and I really hope you enjoyed the listening experience.
