Selling a business can be a complicated process, especially if you have spent most of your career honing other skills. Just because you’re great at meeting the needs of your customers or clients doesn’t necessarily mean that you’ll excel in the complex negotiations involved in a merger or divestiture, and knowing how to get the best price and find a buyer you are happy with is neither easy nor straightforward.
If you’re interested in selling your company but aren’t sure what to expect, here are the six most important things to consider before you get started.
Is Now The Right Time To Sell?
When there’s some turbulence in the economy and sales are down, it’s natural to wonder whether it is time to cash in and get out — especially if you’ve been thinking about moving on for a while. But it’s important to remember that this could mean losing a significant amount of money.
It can be hard to tell the difference between a short-term gully and a sustained decrease in value, so don’t let emotions cloud your judgement. Take the time to make sure this really is the right time to sell.
What Is The Business Worth?
Once you’ve determined that this is an acceptable time to sell, you need to find out what your business is actually worth. In most cases this involves a professional valuation that will determine the current capitalization of your business, which will in turn help you set a fair market price. Before you decide on whether to sell, determine the value of your business.
Are There Ways To Increase Value In The Short Term?
When it comes to selling your business, buyers are mainly concerned with one thing: how much profit did you bring in over the past twelve months, and does that represent an increase or a decrease from previous years?
Due to the economic turbulence of 2020, that can pose a problem. Industries have been unevenly affected by the coronavirus pandemic, and if you are in an industry that is struggling, this may impact how appealing your business appears to a potential buyer.
One thing you should consider is exploring options to increase the profitability or reduce the operating costs of the business itself. While it is important to be as honest as possible with potential buyers, if there are steps you can take to increase sales and revenue, waiting until your profits are starting to bounce back allows you to present interested parties with a better narrative.
What Does The Ideal Buyer Look Like?
If you’ve spent decades building up a business you love and believe in, you probably don’t want to sell it off to just anybody. Before you put your business on the market, it’s a good idea to make a list of the characteristics you’d like to see in an ideal buyer.
Finding the right candidate isn’t always easy, so working with a broker like Beacon Mergers & Acquisitions that can advise you on the divestiture process and help you find the best possible buyer makes the process a lot more straightforward.
What Are You Willing To Negotiate On?
Every sale involves give and take, and you may not be able to get everything you want. Knowing when to walk away is a central part of successful business negotiation, and understanding where your red lines are will help you stand firm should you end up in a situation where someone is pressuring you to sell.
It is in the buyer’s interest to get as low a price as possible, after all, and unless you’ve already decided what the lowest price you’re willing to accept is, and have an experienced mergers and acquisitions advisor helping you fight for a better price, you may find yourself at a disadvantage.
Do You Have the Necessary Legal Support?
Finally, the sale of a business isn’t just a business transaction: it’s also a legal matter subject to the regulations in your industry, region, and country.
You should always make sure you have legal counsel who can help you navigate the guidelines around sales and acquisitions, and if the buyer is based in another province, state, or country, you’ll need to ensure that your business lawyer understands the legal situation in the other jurisdiction as well.
Are You Emotionally Prepared?
It can be difficult to sell the business you poured your time, soul, and effort into building from the ground up. Therefore, you need to assess your emotional readiness before selling your company. Remember that selling your business is not a split-second procedure. In fact, the overall process frequently takes upwards of one year. If you are not emotionally prepared for the sale of your business, it is unlikely that the process will go smoothly. At the same time, it is likely that the entire transaction will be emotionally upsetting and draining.
Even in the best-case scenario, selling a business you have built up and shepherded through good times and bad is going to be a complex and even emotional process. But when you’re prepared for the challenges ahead, take your time with the process, and seek out support and advice from experts who know how to help you get the greatest value out of the sale, divestiture becomes a lot easier.