I’m selling my business. Should I make staff cuts?

Dear Aunty,

I have been advised by my accountant as part of preparing my business for sale to cut back where I can and make the business as profitable as possible.

I think this is really short-term. For one, I don’t want to get rid of staff to cut costs as many have been with us for years and they bring enormous value to the business, which I think a buyer might want.

And I also don’t want to sell someone a dud. Am I being naive and soft? I asked one of my mentors and he told me I was being “naïve” and everyone does it when they go to sell.

Yours truly,
PJ

Dear PJ,

No they don’t. One of the things you have to show a potential buyer is history. It is easy to see when cuts have been made quickly in order to ready the business for sale. Any smart buyer would then ask if the cuts were sustainable or whether they would impact the long-term profitability of the business.

Besides, many buyers also purchase for strategic value. By cutting costs in this way you may actually destroy some of the value in their eyes and the sales price might be reduced.

And you are quite right. Who wants to sell a shell? Go with your gut instinct. Clean the business up but keep your eye on what is going to make the potential buyer a big fat profit. And cutting back now is not the answer.

Be smart,
Your Aunty B

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