Selling your business is one of the most complex and important decisions you’ll likely ever make. A business often represents decades, or even a lifetime, of dedicated work, so it’s important you understand the sale process and how to make the most of it when it comes to the business you’ve invested your time, energy, and resources in. In this article, we’ll examine some of the key steps you should take when it comes time to sell.
One of the most important steps any seller can take is to begin the sales process far in advance of the date they plan to put the business on the market. Working with an experienced merger and acquisition advisor (preferably, years in advance) is one of the single best ways to ensure you’ll be ready to sell your business when the time comes. It will also help you avoid the numerous pitfalls that potentially await.
A good M&A advisor can also help identify weaknesses in your business and guide you in addressing those issues. However, this is only the beginning. Your M&A advisor can help you with everything from strategy and negotiations, maintaining confidentiality and establishing the market value of your business, to connecting you with other seasoned professionals, such as accountants and lawyers.
Use Your Head
A third key point that all sellers should consider is their own psychology. Sellers have greater success when they remain flexible in their approach to selling their business and also remain respectful of prospective buyers. It is important that you put yourself in the shoes of your buyer and try to think of what they will need to feel confident in their decision.
The right seller psychology is also essential. Sellers should not attempt to rush or force a sale or overprice their business. In short, you need to keep your head in the game as much as possible and keep your emotions out of the process.
Is your business exit ready?
If you’re planning to exit your company in the near future, you may find EastWind’s Exit Strategy Playbook helpful in developing your own exit strategy, making your company more sellable.
Offer Reasonable Sales Terms
Sellers also need to realize that the statistics strongly indicate seller financing is likely. Only 75% of sellers ultimately receive their asking price, and businesses that are listed as “all cash” generally don’t sell.
Reasonable sales terms will greatly increase the chances of successfully selling a business. It is common that sellers fail to realize just how much interest they can generate by financing the sale of their business. A reasonable down payment is also another way to improve the odds of selling a business. Being willing to offer financing makes a clear statement to a prospective buyer that you believe in the business and its ability to generate revenue. From a buyer’s perspective, an “all cash” demand can be a red flag.
An open mind and steady temperament will increase your chances of finding a buyer for your business. You may want to sell your business and completely move on to new things. But the reality of selling a business is such that “walking away” may not be feasible. Transitioning your business into the hands of a new owner is usually more of an ongoing process than a sign on the dotted line and receive a check type of situation. Understanding this fact and working closely with an M&A advisor in advance of selling your business will help to streamline the sales process and greatly improve your chances of a successful outcome.