While deciding to sell your business is never a simple process, the rewards of a successful exit can be life-changing and prosperous.
Selling your company can be one of the most stressful and exciting events in your life. Period. Selling a business is not an easy task and one reason why many successful business owners put it off is because of the perceived difficulty of selling your business.
You also can’t expect an expert to simply step into the process of selling your business and handle the entire things for you without a lot of effort being put forward on your part. It’s important to do your due diligence and to be prepared properly for what the sale could look like. This process is also extremely complex that is filled with numerous pitfalls that can totally derail your sale.
Even a sale that appears like it’s on track and headed in the right direction can completely fall apart. Selling a large multimillion dollar company requires a completely different process when you’re attempting to sell a small business. It’s important to partner with the right business broker regardless of the size of your company.
Small business can have very high multiples applied to them and be sold successfully with the support of an experienced business broker. There are many different questions that need to be answered along this process, including:
- How do I find and hire a broker?
- Should I take my business off the market as soon as I accept an offer?
- How long will it take to sell my business?
- How do I find buyers?
- Can I sell only one part of my company?
- Should I tell my employees that I’m selling the business or considering selling it?
- Should I put the business on the market without any preparation?
- What should I do if the buyer refuses to sign certain documentation, like a nondisclosure agreement?
- How does escrow apply to the sale of my business?
- How can I prepare successfully for the due diligence phase of selling my company?
Preparing to Sell and Executing the Sale of Your Business
Preparation can make execution that much easier. By taking plenty of time and special care for the preparation process, you can set yourself up for flawless execution. However, it can be much harder to have a perfect execution of a business sale if you don’t have the proper preparation in line. Selling your business requires focus.
Considering that the sale of the company you have worked so hard to grow will likely be the biggest sale you will ever make in business; it would not be wise to ignore the preparation process or to try to handle aspects of this on your own without the support of a dedicated broker. Sadly, only a few business owners recognize the due diligence and forethought that it takes to successfully sell their company. Far too many business owners plan a quick exit and skip over some of the most important details that could have made this a great success.
Many entrepreneurs have a strong bias towards action and given that there is so much planning involved with listing your business for sale, it’s easy to skip over this and assume that you can worry about these details later. It’s very common for entrepreneurs to jump right into the deep end and get involved once they have made their decision about something. If your goal is selling your business, planning is key.
A lack of preparation, however, has so many pitfalls that could impact the rest of your sale, including reducing the cash value of your company, extending the time frame of your sale and lowering the chances of selling to the right buyer successfully. There are a few different things that you can do to prepare your company as well as yourself for being sold. This includes:
- Protecting and documenting your intellectual property.
- Documenting every aspect of your operations, which can be especially difficult for small business owners.
- Notifying key employees well in advance and giving them incentives for staying under the new leadership.
- Exploring all potential exit options.
- Meeting with a tax advisor to discuss the tax implications of your business being sold.
- Carrying out due diligence before your buyer does.
- Building a management team.
So, What to Expect?
Here are a few things that you will have to have in mind for your expectations:
- Prep Work: The overwhelming majority of buyers are simply not willing to plunk down real money without strong belief in the veracity of the seller’s financial claims.
- Hard Questions: Be prepared for hard questions, and disclose everything you’d want to know if you were the buyer.
- Need For Speed: When buyers send over questions, try to respond to them within a few hours (24 hours at the most). A buyer may like your business, but he has dozens of others available to review, and another company may rouse his interest as much as yours. Keep things moving along if you want to hold the buyer’s attention.
- Training Is Required: Many buyers are new to the businesses they buy, and a large part of the value they get from the deal is your willingness to train them and help them learn the ropes. If you have an inexperienced buyer, it’s smart to prepare for one to three months of training and hands-on help following the sale.
- CPAs & Lawyers Killing Deals: Once an offer arrives, be prepared to justify and back up every claim you made along the way—including those in your marketing package. If you don’t have proof, buyers may discount or disregard your statements. To ensure a successful sale, the onus is on you as the seller to have adequate support for the information you provide.
This would maybe sound a lot of work and could stress you out, but don’t worry! That’s what Business Brokers are for! We can make your exit easier and smoother. If you let me, I can help you in the process.
David Carson Business Broker 