Savvy Business Sales with Rod Russell

SELLING YOUR BUSINESS TO A COMPETITOR

An essential consideration for business owners should be their exit strategy. For most owners this is the time to make serious money and be rewarded for their efforts in business.

One strategy is to sell to a competitor or a similar business who can take advantage of your income without inheriting all your expenses. Often this is a ‘win win’ for all concerned and will likely yield a better result for the seller.

In the past, business owners have been reluctant to sell to the opposition, mainly due to the competitive rivalry they have developed and the fear of letting their rivals see financials and sensitive information.

Things have now changed. We often see competitors as being the obvious choice to purchase an industry-related business. This scenario makes good sense. They take out a competitor, expand their current customer base, increase buying power and products/services on offer, but most importantly, they get industry-trained staff, which is so difficult post Covid.

Perhaps the biggest attraction though is the additional revenue which is gained without increasing fixed expenses. The scales of efficiencies prove this can dramatically increase profits and market share.

We recently sold a business returning annual profits circa $500,000. The competitor who purchased it was able to relocate it to his own premise and save on many of the duplicated expenses. This will increase his profit levels to around $725,000. Considering the added profit, the buyer could justify paying a premium price that other buyers could not perceive as value.

This strategy does come with risk though, as settlement is never guaranteed and it could expose your customer base, staff details, suppliers, intellectual property and weaknesses in your business.

To reduce risk, it is recommended you engage a specialist business broker who has the experience and knowhow to deal with these delicate situations. ca www.savvybusiness.com.au

ROD RUSSELL has over 28 years’ experience selling businesses on the Sunshine Coast and beyond. His award-winning team at Savvy Business are leaders in buying or selling businesses.

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