When it comes to generating the best bang for your buck, selling a business might be more important than running the business well. The instinct of sellers might be to begin disengaging from the business after choosing to sell, but sellers must own the sales process if they are to earn as much as possible from selling their business.
You’ve worked hard to build a growing and profitable business, so be sure to generate the value you deserve by taking the following steps:
- Engage the right type of legal counsel from the beginning. Use a law firm with experience in the sales process for companies of similar size, and make sure they have worked on sales to a variety of types of buyers.
- Get your financials in order. A good buyer will appreciate meticulous financials on your company’s profitability, expenses, revenues, historical performance and more. The more detail you have, the stronger the offers you’ll see.
- Be willing to admit or even highlight weaknesses in your business. To a savvy buyer, those are opportunities! For example, if your international sales are weak or non-existent, you can highlight this as a potential growth area.
- Do sell-side due diligence in advance of selling with a major accounting firm. This is when you take a deep and introspective look at your own business. Partnering with a credible accounting firm that can act as an experienced and impartial voice will improve the process. This activity will also help you set a price, and enable you to quickly answer common questions from buyers when the time comes.
Once you’ve taken those steps, you will likely face a decision on whether to choose to sell to a financial buyer or a strategic buyer. Financial buyers are entities like private equity firms or venture capital companies while strategic buyers would include competitors or companies looking to enter your line of business.
Each type of buyer offers pros and cons, and many successful strategic sales take place each year. Financial buyers offer some distinct advantages:
- A quiet sales process, which can protect your asset by limiting disruptions and concerns from customers, employees, suppliers and competitors.
- A quick and simple sale, where financing is usually assured.
- Access to resources that can take a business to the next level. This can include operational expertise, international capabilities, financial resources and many other tools that supercharge growth of companies.
- Flexibility. Many financial buyers offer an opportunity for the seller to remain invested and/or involved in the company. This can allow owners to step back and cash out some of their equity without disengaging. It also offers a chance to benefit from success down the line.
Whichever solution works for best for you, be sure to prepare properly. By truly owning your sales process, you will realize the best possible gains quickly.
