Business owners may have many reasons for selling a company; be it for retirement, pursuing a new passion or opportunity, or personal hardship which requires greater attention than can otherwise be afforded. Whatever the reason, it’s important owners understand that selling a business often takes more time and effort than selling a hard asset such as a vehicle or real estate. With that in mind, developing a business exit plan well ahead of listing is key to maximizing the deal.
Negotiating for yourself or exposing the company name and details ahead of a signed NDA can cause substantial damage to a company during the sale process, which is arguably the most vulnerable time for a business. Customers and employees may fear instability, leading to lower productivity and reduced revenue at the worst time possible. It’s advisable to hire a third party to represent your business to prospective buyers.
Run The Business Like You’ll Do It Forever
The final quarters in your business should be among your highest grossing. There’s nothing better than showing a prospective buyer the company’s best years are ahead! Consider the blood, sweat, and tears you put in to grow the business to this point a warm-up for your grand finale at the helm.
Get a Realistic Valuation
Business valuation isn’t a one-size-fits-all calculator. There are nuances for each business and industry that appeal to different prospective buyers; an online tool or Fair Market Value report cannot account for the nuances, and assess a value based on an algorithm. Consider an investment in a new product or service line that hasn’t been realized—a calculation based on the last 5 years’ revenue may not consider the potential for the new product over the next 3 years. A methodical deep dive by a business valuation expert takes each nuance into account as they build the valuation.
Have A Thorough Offering Memorandum
Hopping online and performing a quick search for ‘Offering Memorandum Example’ provides more than 16 million results, yet not a single one is a dead ringer for your business. You’ve spent years building this business, the single document describing the value your company offers should not be left to a quick template you found on the internet.
I’m sure by now you’ve learned the value of surrounding yourself with smart people. Finding the right business broker to represent you while selling your company is of utmost importance. Look for an M & A firm who knows your market, has experience in your industry, and excels at marketing your business to the proper audiences to solicit multiple offers. Even more valuable is the insight they can provide on what a good deal looks like for your company considering taxes and intangibles, not simply the largest payday.