Business owners think about selling their businesses for different reasons. Perhaps you have lost your enthusiasm for entrepreneurship, have become bored with the old routine, or health problems persuade you to sell. Of course, retirement also justifies exiting the business. Whatever triggers your decision to sell your business, you should take preparatory measures before starting the sales process, especially before talking to potential buyers.
It’s not easy for any entrepreneur to part with their company. Nevertheless, thousands of companies transition to new management every year. A reasonable price for the company alleviates the pain of parting. For many, the company also serves as an old-age safety net to fund retirement.
We know selling your business is personal, and it doesn’t have to be a negative experience. Let’s talk about how you can make the experience of selling your business a positive one.
Steps to Make Selling Your Business a Positive Experience
1. Know where you’re going next.
Understand what’s up next and why. Every entrepreneur wants to get a high business valuation, but is the price justifiable to the buyers? Any ambiguity may lead to uncertainty which may result in lowering the selling price.
Whether you’re selling your business intentionally or due to adverse economic issues, ask yourself this question: What are you going to do next? Will you simply retire or start a new venture? Whatever you do, you must do it on your terms.
Once you know what’s next and why and have prepared all the necessary information, you can start negotiations with a clear head.
It’s in your best interest to keep the business momentum going during a sales process. Delays rarely work in favor of the seller, as so many things can derail progress. External events, such as the COVID-19 crisis or a financial crisis like the Great Recession, can lead to the buyer changing focus or strategy. But when you are ready and know where you are going, you can have the upper hand during negotiation.
2. Develop an exit plan.
Prepare as early as possible to sell the company. The process should begin three to five years before you take the company to market. This early preparation helps you sort, organize, and improve its financial status, optimize its structures and systems, and expand its customer base. These improvements will help transition the company to new management, but they will also result in more efficient operation.
One of the most critical aspects of an M&A advisor’s services is to help the client view the business from a buyer’s perspective. Buyers tend to shy away from risk. A buyer looks at many potential candidates and generally buys the company with the lowest risk. Common risk areas include:
- Owner dependency
- Customer and sales concentration
- High churn rates
- Legal issues
- Lack of transparency of figures or lack of financial control.
If you can improve your company’s position in the above areas before pitching your business to potential buyers, you put yourself and your company in a much more favorable position.
Having a plan can reduce a lot of stress! A good exit plan can help you overcome difficulties, like selling at the wrong time, a too-small customer base, and a lack of professional exit strategy implementation. Entrepreneurs who proceed without an exit plan cannot justify the asking price for the company and ultimately sell it for much less than they expect.
3. Be confident in your exit plan.
There’s nothing worse than having a plan and feeling unsure about it. This is your business: it needs your confident action. A team of experienced advisors can reassure you and help you move ahead. They can guide you through the different exit phases so you achieve your exit goals, including:
- Determining your goals
- Determining the company value
- Preparing information memorandum and other sales documents
- Increasing the company’s market value
- Placing the company on the market
- Accompanying company audits and contract preparation
- Evaluating recommendations from change management experts
- Guiding succession planning and change management procedures and policies
- Supporting the transition when the business is sold.
Planning Ahead Is Planning for Success
Make your exit plan a positive one by planning and having a plan in which you are confident! Selling a company is a matter of trust. Invest enough time to search for a suitable advisor and prioritize a detailed planning phase to avoid hidden cost traps, avoid nasty surprises, and increase the chances of a successful sale of your company.