Selling a business you have passionately nurtured through the years can seem like a daunting task.
But, just like most other issues you have encountered, when you break it down into simple bite-sized chunks it starts to look a lot more manageable.
So, here’s a look at the sale process in six steps:
1. Deciding to sell
The decision to sell your business is the part you will probably find the hardest.
If you are selling purely for business reasons and can choose your time, it’s well worth looking at market trends and thinking carefully about how you may be able to add value to the business (see the Value Builder Score). Considering starting this as early as possible.
If it’s for more personal reasons such as health issues or family decisions, you may understandably feel less able to delay for the sake of commercial gain.
Then again, you may be itching to move on to something even better, or trying to figure out how best to cope with market fluctuations or bad news on the horizon.
2. Preparing your business for sale
Where you can afford to take the time, preparing your business is usually the stage at which you can do most to positively influence the final sale outcome.
Business experts agree that preparing a business for sale is a process which is often measured in years rather than months. In essence, you are seeking to deliver a profitable business in tip-top condition.
That, of course, involves getting all of your financial records and other documentation in good order, not only to show your business is organised, but also to make it easy for potential buyers to examine your great track record over a number of years.
But perhaps even more importantly, you should take steps to remove yourself from the business well before sale time.
And if you have a good management team in place, buyers will not be able to suggest there’s little value in the business once you have left the scene.
Also give yourself time to reflect on what actually makes your business stand out from your competitors – then you can set about the task of ensuring your company style, standards and other unique qualities are plain for all to see.
Again our Value Builder Score will help you understand the options here.
3. Valuation
Choosing one of the three common valuation methods will mostly depend on the standard practice within your industry.
At this stage, you will need the advice and services of professionals who have a broad experience of your business sector.
Complete honesty is absolutely essential. The valuation you receive will tell you the worth of your business, but as long as it’s well-presented and highly credible.
It should help to build confidence and trust with potential buyers and in addition, a timely valuation will give you a clear indication of where the value lies in your company – and probably some useful pointers about how that value might be increased.
4. Finding the right buyer
Handing the business on to the right new owner is a critical phase for the future of your company.
And if you have spared no effort in building up your company, you will certainly want to guarantee it remains in good hands.
So, think carefully about the kind of new ownership you would like to see in place. You may be fortunate enough to find someone who will continue in the same vein as you, but try to remain open to the idea of new approaches which could bring further life and vitality to your business.
Assessing potential successors becomes easier if you have previously identified and prioritised the essential features you will be looking for.
5. Due diligence
Once you have located a serious buyer who meets your criteria and wishes to proceed, the potential buyer will want to conduct a thorough due diligence of the business.
At this stage, you will want them to sign a confidentiality agreement before giving them access to private (and sensitive) legal, financial and commercial business information.
6. Deal negotiations leading to a sale agreement
With the insights gained from the due diligence process, your potential buyer should now be in a position to negotiate the details of a draft purchase agreement.
Inevitably, this involves compromises as the buyer points to features which may slightly downgrade your valuation, while you and your team counter and reference aspects of your business which could potentially raise the valuation even further on the open market.
And provided your preparation has created an atmosphere of mutual confidence, it’s usually just a matter of time before the parties agree a final sale figure which meets the expectations of both buyer and seller.
For you, that’s likely to be a moment of relief and celebration. But you’ll then have plenty of time to reflect on a job well done.
By Jo Thornley, Head of Brand and Partnerships at Dynamis.
Joining in 2005 to co-ordinate PR and communications and produce editorial across all business brands. She earned her spurs managing the communications strategy and now creates and develops partnerships between BusinessesForSale.com, FranchiseSales.com and PropertySales.com and likeminded companies.