If you’re looking for a guide to selling your business privately, you’ve come to the right place.
Selling a business is a complex affair. And Forbes and Bloomberg tell us that 8 out of 10 businesses will not find a buyer. With competition for acquisition so high, it’s no wonder some business owners prefer to sell privately. In one of our previous posts, we looked at how to sell a business , but in this blog, you’re going to learn how to sell a business privately.
Rule #1 Get The Business Ready For Sale At Least 1 Year In Advance
Contrary to what many people think, you can’t just wake up and find an instant buyer for your business. It doesn’t work that way. It’s key to have an exit strategy in place. And the initial step is usually getting the business into a state of readiness for sale at least 1 year in advance.
This means, 12 months before putting up your first listing you should work on:
- Your argument to convince buyers about your reasons for selling
- Putting effort to improve business aesthetics – painting premises and fixing equipment
- Improving your sales – increasing your customer base
- Having the business appraised
- Preparing all your legal and financial documents
With all this in place, you can proceed to what is probably going to be the game-changing aspect of this entire process – hiring a competent M&A advisory firm.
Rule #2 Get Yourself The Best M&A Team You Can Afford
Seriously. This is probably the best thing you can do if you want to increase your chances of a successful private sale.
Selling a business is hard work that takes an entire village to pull off. There are a lot of nuances, complex legal obligations, and financial requirements to be satisfied.
An experienced M&A advisory firm in your corner means having the necessary support and counsel at hand when you most need it.
Rule #3 Don’t Include The Name Of Your Business In The Listing
Discretion is of utmost importance if you want to sell your business privately. Therefore, you should never include your company name or contact details in any business listings.
Get a professional copywriter to write your business ad listing. The copy should be so structured that it provides enough information to pique buyer interest without divulging too much.
Secondly, secure a proxy phone that cannot be traced back to your business. Create a surrogate email address as well for communication with any prospective buyers.
Rule #4 Tell No One About The Intended Sale
To many, this may seem like you’re blindsiding employees, vendors, landlords, and others you’re in business with. However, it’s actually in your best interests and those of the company you’re selling.
Telling employees too soon can prove fatal. Your experienced employees are one of your greatest assets – especially those in management positions. The last thing you want is a mass exodus before escrow closes.
Vendors and landlords may change their contract terms and conditions, reduce credit availability and or make impossible demands. You don’t want this additional complication.
So who should know? Only those directly involved in the transaction – your brokers, CPAs, M&A attorneys, and financial agent if there is one.
Rule #5 Non-Disclosure Agreements Are A Top Priority
When discussing how to sell a business privately, we cannot overemphasize the importance of Non-Disclosure Agreements (NDAs).
To get the ball rolling, your designated M&A broker will secure signed NDAs alongside buyer profiles before you disclose and hand over any business information.
If your buyer happens to be a competitor, you definitely need stronger agreements so be sure to get a seasoned M&A attorney to draw up iron-clad Non-Compete Agreements as well.
This is crucial if you’re handing over trade secrets and sensitive financial information. You don’t want to have a competitor take all this information, walk away from the deal, and use it to their advantage right? So be wise.
Wrap up
At Sun Acquisitions we take great pride in providing prospective sellers with an experienced M&A team ready to assist, offer counsel, and advice about how to sell a business privately.
To learn more contact us today.
Looking for more insight on selling a business? Check out these links:
- Mitigating Post-Closing Risks Through The Rep and Warranty Insurance
- How to Navigate a Buyer or Seller’s Initial Meeting
- Are You Financially Ready to Sell?
- Buyer Motivation – How to Confirm?
- Sell NOW – The Crystal Ball is Pretty Clear
Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.
