As I often tell my clients, selling your business is a process, not an event. Determining the right time to sell, and finding the right buyer to sell to, can be stressful. There are tax and legal issues to consider, and negotiations can be complex and lengthy. However, as is true for most major business (and life) decisions, preparing as much as possible ahead of time can help you feel more confident, smooth the transaction process, and increase your chances of realizing a higher return on your life’s work.
To help you get started, I’ve outlined 5 ways you can start preparing for the sale of your business:
Define your priorities.What, exactly, do you want out of this transaction? Are you willing to finance all or part of the price? Do you envision a future role in the business after the sale? What’s your number? Knowing your priorities ahead of time, and the relative importance of each priority, will go a long way towards crafting a deal you can live with and expediting the transaction process.
Tell your story.What makes your business unique? Are you an award-winning company? Do you have a niche specialty that sets you apart from competitors in your field? A buyer will pay a premium for a great market position, and promoting your unique selling proposition consistently across your brand can make you more attractive to buyers.
Get your affairs in order.Formalize and organize your records; clearly document your transactions; examine supplier and customer contracts; review real estate leases; review arrangements with any business partners; conduct an intellectual property audit, or financial audit if necessary; ensure that you are in compliance with all laws and regulations; and lock in key employees and consultants. Staying organized and on top of these types of business processes is not only good business practice, it will pay dividends when it comes time to plan for a sale.
Do your own due diligence.The official due diligence period will come after you receive a letter of intent from the buyer. During this period, the buyer has access to investigate your financial and other records prior to negotiating a deal. To ensure that this period goes as smoothly as possible, you can—and should—do some due diligence on yourself ahead of time. Looking at your business through the eyes of a buyer can allow you to find and correct any issues that could delay or devalue a future deal. Never try to hide anything—smart buyers will find it, and it could cost you a sale.
Build your team.The sale process begins as soon as you get a call from an interested buyer. Having a team of experts in your rolodex that you can assemble when the time comes will help you confidently dive into the stages of the sale process, and avoid delays that could result in a lost opportunity. You’ll need a lawyer with transactional experience; an accountant with M&A tax experience; a financial planner; and possibly an investment banker or business broker.
By taking these steps in advance, you'll ensure that you are ready when the opportunity presents itself, able to take advantage of market conditions and drive internal factors that will maximize the value of your business.
If you have any questions about the sale process, leave a comment below, check out my recent blog post, or feel free to reach out to me directly.