Top Tips for Selling Your Business
When I get a phone call from a director, asking to sell their business, they want it done yesterday. They have made the decision to sell, and now things need to move. But when selling your business you should always think of the following key pieces to make sure your sale goes as smoothly as possible.
Plan an exit strategy. Don't forget to run your business. This is crucial while any sale process in ongoing. This is to maintain the day-to-day operation of your business, because a buyer will put pressure on the sale price if they see your trading performance is suffering.
Make sure that any key employees are available as much as possible so that you can introduce them to buyers.
Prepare properly, don't overlook simple things. Good preparation leads to an increased value. Part of this process is to look at your business from a buyer's perspective. Think about asking friends or family to take an objective look. Clear up loose ends and get your financial information up to date. Try to arrange the sale of your business just after recent trading results – particularly if they're good.
Like most things in life, first impressions count, improve your reception areas and make sure all parts of the office are presented professionally and in a welcoming state.
Investigate the best route to sell; don't trust all advisors. Create a beauty parade, select from criteria your business needs. It can be an emotional process. Conduct some research including a Google search to investigate background information. Selling your business happens once so don't sign up to the wrong agent.
The value of your business is dictated by how much a buyer is willing to pay and many formal valuations are irrelevant, particularly during the turbulent times. Furthermore, the moment you put a price in front of a buyer then they will naturally offer less. This is more important than a formal valuation. This is for you to understand the real value of your business. Is it your location or the strength of your order book? Have you been established and profitable for many years? Do you have any contracts, long standing trading relationships or exceptional employees? Agents often inflate valuations to secure your contract and your fees. Always challenge the methodology behind any valuation.
Leakage of information unsettles employees, suppliers & customers alike. Competitors may also take advantage. Selling a business is not like selling a house and requires high levels of confidentiality and anonymity. For that reason, initial sales material should be anonymous and provide threads of key information.
You need to inspire a buyer about the potential of your business. Put yourself in a buyer's shoes and think what you would do if buying the business. Develop a small marketing strategy or business plan. Detach yourself from subsequent feedback as buyers may have different plans and may seek to criticise as part of a negotiating tactic. Remain calm, stay focused on your goal and respond positively. You want to sell; you don't want to get emotional.
Buyers come in all shapes and sizes. There are genuine, motivated buyers, first timers, companies looking for synergies and seasoned buyers searching for market opportunities. Unfortunately, there is also a considerable retinue of time wasters, snoopers, competitors, dreamers, dabblers and the wildly unrealistic. You need to be firm but fair with initial enquiries and make sure they prove their interest by signing a confidentiality agreement or responding positively to your requests for information. If they're not interested in calling back or signing an agreement, they're not going to buy your business.
Buyers want everything, and they want it now. Be candid but circumspect. Try not to leak confidential trading information – key accounts, leases, employee details – until you've received a signed confidentiality agreement or a clear sign of commitment.
For some small businesses, the owner is the business, and you can't detach yourself from that. However, if you have management teams in place then try to show you're not pivotal to the business. If the business is heavily dependent on one person, then buyers might insist on a lengthy handover period or defer payments until convinced they can operate without you. They may decide you are the business and without you the value disintegrates.
Selling your business is the ultimate reward for the risk and effort you've put in over the years. The process can be time-consuming and emotional but when you do achieve completion, enjoy the celebration and good luck.
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