How often have you received an approach from a company proclaiming they can sell your business? Perhaps it offered you a place at a seminar or a ‘free consultation’ with an expert in valuing your company. Where did the letter or email go? Was it set aside because one day it may be useful, or put straight into the bin?
The business of selling businesses is, well, big business. Many owners have found the process helpful and successful, while others have found it frustrating and inconclusive. The key point to recognise is the difference between being ready to sell – both you and the business need to be ready – and being ready to plan your exit. There is a big difference in timing and the steps you need to take.
If you are ready to sell – meaning you have done your planning, prepared yourself and your business and know what you want to do next in your life – then take up the offer of a free seminar or consultation; view them as valuable learning if nothing else.
If you are not ready to sell but feel that the lack of a plan is a gap you want to fill, contact an exit planning adviser. The ‘we can sell your business’ letter you receive may include an advisory service but most don’t as their business model is built around earning fees from you for the marketing of your company and the sale transaction. Even if an advisory service is offered you may feel that you want to separate the two activities so that your exit planning adviser is motivated to provide you with best outcome rather than hasten you towards the sale.
Here are five points to consider the next time you get an unsolicited letter offering to help you sell your business:
- Are you ready to sell and is your business ready to be sold? These may seem obvious points but you and your fellow owners should have thought clearly about ‘what next?’ and your business needs to be in the right shape to achieve the best value.
- Is frustration pushing you towards a sale? Timing is everything. If you get repeated mailings from companies who specialise in selling businesses, you will receive one when you are feeling less than enamoured with being a business owner. This is the worst time to respond to a solicitation. To avoid ‘seller’s regret’ only commence the process of exiting from your business when you are able to take a balanced, pragmatic and long-term perspective.
- Have you done any homework to understand the potential market for your business? Many business owners expect there to be a definitive value for their company and some get frustrated by the ‘it depends what someone is prepared to pay’ answer. There are methods for valuing a company and when the market is taken into account there may be some guideline multiples to inform the valuation. However, on the assumption you want to get the best price for your business, it is well worth considering your company’s ‘strategic value’. For example, your business may be worth more to one of your suppliers who can benefit from your access to market than to one of your competitors who simply wants to add scale.
- Do you know what questions to ask and how to assess the answers you get back? As in any business relationship the better prepared you are the better the outcome you will achieve. Knowing what questions to ask is a good starting point, but even better is knowing how to assess the answers you get. In any professional relationship you hope and expect everything to be as it seems but there is jargon to deal with and some of the processes may seem a little opaque, so be well prepared.
- Do you have the time and capacity to embark on this very significant project? Selling your business or preparing to sell your business requires a lot of your time and in most sales it doesn’t stop there due to tie-ins and contingent payments beyond the completion date. If you don’t have the time then it may be because the business is too dependent on you in which case it may not be ready for sale.
There is nothing that a buyer wants more than a well-run business with excellent future prospects. Our contention is that this is exactly the kind of business our clients want to run for themselves so whether you decide to sell or retain the business, with our help you get the best possible outcome. Contact us to explore this further.
(Image by gpointstudio on Freepik)