Selling a business in Kenya: Complete Guide
The best time to sell your business is when sales and profits are strong. This helps generate interest from buyers and allows you to place a higher value on your business. It can take up to 2 years to plan a successful business exit, so it’s a good idea to use this time to strengthen your business and maximise its value.
If you need to sell quickly for financial or personal reasons, you may find it difficult to achieve a higher price. Seek professional advice as soon as possible so that you can put a plan in place to achieve the best possible outcome in the time available.
Planning the sale of your business involves making specific decisions about why, when and what you are selling, and who you are selling to.
This guide describes the basic process of selling a business. Because selling a business can be a complex and time-consuming process, you should seek advice from your lawyer, accountant or business broker before you sell.
Preparing to sell
Think carefully about your reasons for selling, your goals for the future and how you can pull your business into shape before the sale (if it isn’t already).
If you are determined to sell, a good strategy is to give yourself plenty of time to prepare your business before you advertise it for sale. You could focus on:
- showing year-round profitability
- reducing your costs
- building a strong management team
- maintaining high-quality products or services
- developing a unique product or service
- expanding your online presence
- creating a strong customer base to reduce your reliance on 1 or 2 large clients
- maintaining premises and making sure assets are in good condition
- signing shorter-term or longer-term leases – whichever makes your business more attractive to buyers
- using formal, written contracts rather than informal handshake or verbal agreements
- developing comprehensive business, marketing and succession plans to enable your staff to run the business when you sell it
- settling any outstanding legal or tax matters (e.g. warranty claims).
Improving these areas should strengthen your business, and make it easier for you to attract serious buyers.
Alternatives to selling
Before you commit to selling it might be worthwhile exploring the alternatives.
You may be considering selling because your business is not performing, or you want to step back from day-to-day operations. In either case, there are alternatives to selling. Talk to your business adviser to see if any of these alternative options suit your business:
If you need to increase your short-term cash flow, you could sell some of your assets instead of selling the whole business outright. Learn more about managing your cash flow.
Your accountant can help you assess if your short-term debts will become more manageable with long-term financing.
Forming a strategic alliance
Your business may become more successful if you form a mutually beneficial relationship with another business.
Amalgamating or merging
Your business could become more competitive if you amalgamated or merged with another business.
Floating your business on the Australian Stock Exchange may attract enough capital to allow you to continue operating.
Making your business self-reliant
If you want to take a step back from day-to-day operations, or need to take a break due to health or personal reasons, you could hire and train new staff to replace you, while still retaining ownership of the business.
Developing succession strategies
Putting a detailed succession plan in place and training your successor to take over will make it easier for you to reduce the amount of time you spend on your business.
Using a business broker
Selling a business can take a lot of time and effort, so it is a good idea to get professional help. Business brokers are experts in helping their clients to sell and buy businesses. You can find business brokers by searching Bizna Online Business Directory and Bizna Online Career Directory. A business broker will usually charge a percentage of the final sale price as a fee for their work.
You’ll need to weigh the pros and cons of using a business broker and make the decision that is best for you.
Advantages of business brokers
- They will have experience in marketing and advertising businesses for sale.
- They can save you time by screening buyers and decide who is and isn’t serious.
- They will usually already have a list of contacts who are looking to buy.
- Business brokers feel confident and comfortable with requesting the disclosure of a buyer’s financials and are well placed to make decisions about them.
- They can remain independent through the process and work efficiently towards selling your business without the emotional attachment that you may have.
- Typically, brokers have strong negotiation skills.
Disadvantages of business brokers
- You have to pay for the services of a business broker.
- You might feel you lack control over the process if you are used to doing everything yourself.
- You might feel some pressure to accept a contract you’re not happy with.
- They may want you to sign a contract at a lower price rather than not selling because their fee is a percentage of the sale price.
Choosing a business broker
If you do use a business broker, assess their experience and expertise before you hire them. Find out:
- how their fees are structured
- if they specialise in a particular type of business
- how many businesses they have bought and sold
- if they have ever owned a business
- if they can provide letters of reference
- how many clients they are currently working with and if they have time to properly represent your business.