Selling a company is a complex process with many pitfalls.
We will look at 10 things you need to make sure you do to avoid those pitfalls:
- Plan the sale. Planning is the most important part of selling a business. It usually, takes a medium sized business a couple of years to properly prepare for a sale and get the optimum value. This includes getting finances and paperwork in order, training up the management and making sure work systems are in place. A business broker is able to work through all the areas that are necessary for the best outcome.
- Get a proper evaluation. It is always important to know how much your company is worth. The price will be negotiated and you may not end up with your asking price, but if you start too high or low, you may lose out on buyers or sell at a lower price than your company is worth.
- Be certain about why you are selling. A buyer will want to know why the company is being sold. When there are genuine personal or business reasons this gives confidence to the buyer. When it is unclear then the buyer can feel there is a lack of transparency. This may prolong negotiations and also lead to devaluation.
- Put the company on the market to a wide number of buyers. Don’t sell your company to the first person who shows interest. There are probably other buyers out there for whom your company will have a higher value. When there is no competition a buyer can also drag out the negotiations and take advantage of the situation. You are less likely to get the best deal. Business brokers will normally have a wide network of potential buyers.
- Keep confidentiality. Once the idea of a sale leaks out, it can cause dissension in the company. Employees can start feeling uncertain about their prospects under new leadership and start looking for jobs elsewhere. The company can lose key workers. Tell only those who need to know until the deal has been clinched
- Keep your focus on the running of the business. The whole selling process is a time consuming task that can detract from the smooth running of the company when it needs it most. This is another reason for getting professionals in to help. Do not get sucked in to spending all your time involved in the sale. Remember your goals in setting up the business and keep it heading that way.
- Think globally. Even if you are a local business, the best buyer may be far outside your locality. Don’t be blinkered into thinking that you need to find someone local to take over.
- Have shareholders’ backing. Make sure you have your shareholders on your side about the sale. They need to be informed and in agreement or they could put a spanner in the works!
- Don’t be rushed. If you are in a hurry to sell, then it is unlikely you will get the best deal. The urgency will be to the advantage of the buyer. They will be able to get through better deals for themselves as you just want to get the negotiations over. They may also suspect a problem.
- Get the right professional help. Even with experience it is best to get outside help when selling a company. They can help you through the whole process. In addition to the points already mentioned your emotional involvement in the company can cloud your better judgement during negotiations. The professionals will know how to get the best deal for you. It is important to get professionals that are suited to the job. They need to have experience in the buying and selling of businesses, including in your type of business.
Editorial Team at MergersCorp M&A International
MergersCorp™ M&A International is a leading Lower-Middle Market M&A advisory brand, offering professional M&A services to clients across the world.
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