I’m starting to think about selling my company. What can I do in a short period of time to prepare?
Figure out what you want from the sale. Make sure the financials tell the story you want to tell. Do what you can to get the business to run without you. Decide who will most likely value what you have, and who can afford the purchase. Build a team of advisors and a back-up plan.
Start with some basic questions. Do you want out, cash in hand? Do you have a minimum amount you need to make from the sale? Do you want a job with the new company? Are you planning to do additional work in the industry, or do you want to walk away and never look back?
Can I produce reports that show a clear picture of the business, both the strengths and the weaknesses? Do the details match my story of what I’m selling, and why? Do I have a financial advisor who can talk with a potential buyer and support the selling process?
How much of the company depends on me? Why would a buyer purchase the company, if the company is just me? Who can step up to do what I do? Do the people in my company have an incentive to stick around through a sale process?
Thinking through a list of potential buyers is crucial, and goes back to your earlier questions about what you want out of the deal and what are your company’s strengths and weaknesses. You probably know as much as anyone about other players in your industry. That’s an obvious place to look.
Once you’ve gone through industry players, start to list less obvious options. Who is looking to get into the industry? Who wants clients and client relationships like the ones your company has already built up? Who is looking for proven human capital talent? What processes does your company have in place, that you’re particularly good at, and who would find those a benefit in their business?
Get your financials well organized and clear so a buyer trusts what you’re telling them. Don’t be afraid of showing your company’s weaknesses, such as too much overhead, not enough sales, too much debt, not enough reserves. Many buyers look for problems they can fix and profit on. And the problems will come to the fore when you go through due diligence, so you might as well be upfront about them.
You may or may not want to tell your team that you’re thinking of selling. On the one hand, they’ll figure out something is up sooner or later anyway. On the other hand they may get nervous and start looking for a job. You can offer key employees an incentive to stay through the sale and transition. You can also get an idea from potential sellers as to what they’re looking to buy. If they’re looking for talent, it will be important for you to do some selling to your employees on the advantages of sticking with it.
When considering buyers, look for bigger, profitable companies. You want to be sure your potential buyer has the muscle to get the deal done. They are likely to be more sophisticated, and more demanding. Don’t let those traits discourage or intimidate you.
Review your list of current advisors. Do you have an accountant and a lawyer who have experience helping their clients negotiate their way through a sale? Do you have a business broker who can help build a target list of potential buyers? Who do you trust to advise you as you go through the ups and downs finding a buyer and closing a deal?
Consider your options, as you start to go through the selling process. Find more than one potential buyer, at least a primary and a backup. If you’re not sure you’ll get what you want out of the sale financially, make a plan for how you’re going to close the gap – with the business or outside of it. Negotiate from strength because you’ve already figured out how to deal with the variable.
Looking for a good book? Sell Your Business Your Way: Getting Out, Getting Rich & Getting On With Your Life, by Rick Rickertsen.
