Selling your business might be far from your mind right now. Perhaps you just started and/or it’s going fabulously well. Don’t fix something that’s not broken, right?
But the changing business landscape requires that we think ahead not just six months or one year, but three, five or even ten years. Circumstances can change quite quickly and priorities shift. Here are some things to think about:
1) Who are the decision-makers when considering a sale?
Maybe it’s entirely up to one person or a small group of partners / owners. Maybe the board will need to decide. Often the sale of the business is a life changing event and spouses or other family members might weigh in. Figuring out who will influence the decision and to what extent their goals are aligned is a good starting point.
2) Who might consider buying your business?
Perhaps it’s a competitor? Perhaps it’s a customer? Perhaps it’s a strategic investor who wants access to your technology, plant, team or client base? Perhaps it’s a financial investor who is looking for aggressive returns? It might be someone inside the business. Clarity on this will influence how you manage your business and present it for sale.
3) How will your business be valued?
While there are many “models” which determine business valuation, the fact is that the final value will be a matter of negotiation. Different acquirers will value different things such as profit, revenue, growth rates, market share, future potential, assets, banking relationships, the client base, the CEO and so on. With clarity on this, you will prioritise the items which drive the value the most.
4) Other than cash, what else is important to you?
Do you want to work for the acquirer after the transaction? Do you need a lot of cash paid upfront or can you wait? Are you willing to consider an earn-out thereby taking risk on some of the sale price? If you remain in the new organisation, do you care what your title, role or job description is? A large number of transactions do not meet the objectives of both the acquirer and the seller. In most cases, it is not about the financial outcome but the other terms and conditions of the sale.
5) Are you familiar with the process of selling your business?
The acquirer may be very sophisticated and buy many businesses each year. In that case, they will probably dictate the approach. But you will still need to present your business setting out the strategy, the plans and the history. You may need to appoint advisors and engage in due diligence before closing the deal. It is highly advantageous to have access to people who have been through this process. Keep in mind, in many cases you will not share transaction discussions internally which can make the process of selling your business a very lonely one!
6) What about timing?
This is pretty simple. Things will take longer than you think and you want to be dictating the terms as much as possible. Selling under pressure seldom brings a positive outcome. Start early.
7) How do you know if selling your business is right for you?
Perhaps you don’t. And you never will know for certain. The outcomes are unpredictable but then business is also inherently uncertain. While you may lose independence and autonomy, you might also reduce stress, learn new skills and expand your horizons.
These may seem like “big questions” but you shouldn’t delay too long. The best exits happen because of early planning, detailed preparation and careful strategy. We can help develop this strategy and interpret what drives the value in your business. That will help you put a plan in place to maximize the value and increase the chances of success.