How often have you received a letter from a company telling you they can help you to 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 go? Set aside because one day it may come in useful or filed under WPB – waste paper 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 and the business are ready to sell, you have done your planning and you know what to do next (there are many alternatives to retirement once you have the proceeds of selling your company) then take up the offer of a free seminar or consultation. View them as valuable learning if nothing else. You may end up pleasantly pleased with a potential valuation, or at least an indicative figure for your own planning purposes, clear about the next steps and confident in the relationship you have made with the people who you are entrusting to do the best for you.
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 letter you receive may include an advisory service but most don’t as the 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 advice rather than hasten you towards a sale date.
Related: Getting the most out of my business
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? This may seem an obvious point and whilst you can sell on a whim it is unlikely you will get full value for the business you have built. A marketing approach that lists ‘companies we have sold’, especially where they have attracted a ‘premium’ (over what?) may be very tempting but your company is unique and should be treated as such. Previous successes may indicate a good record but yours is a one-off and most likely you will only sell a company once so make sure you are ready.
- 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 felling 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.Related: What’s the point of an exit plan if you aren’t ready to sell?
- 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. In the absence of any market context 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 why someone would want to buy and assess 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 want 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 start point but even better is knowing how to assess the answers you get. If you are responding to a marketing letter you are entering into the first stages of a sales process – this being the sale of ‘business selling services’. 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 is time consuming. It requires a lot of your time both in the phase of getting the business ready for sale and in the marketing and selling itself – and in most sales it doesn’t stop there with tie-ins and contingent payments beyond the completion date. One simple test is to ask yourself if you have the time to sell your business, if the answer is no then it may be because the business is too dependent on you in which case it may not be ready for sale.
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We don’t sell businesses but we know all the key people who are instrumental in ensuring the right outcome for the owner. Our role is in helping you get yourself and your business ready for sale, or at least to put you in a position where you have a choice of continuing to run a successful attractive business yourself or to consider a sale at the time that is right for you and your family.
Related: Businesses we have helped
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 you get the best possible outcome.
The better the plan the better the eventual sale value and the better the next stage of your life.
To explore this further contact us today.