10 Things to Know Before Selling Your Business
1. Take action
Selling a business takes from 3-12 months sometimes, even more, having enough time to negotiate is crucial to making a good deal.
2. There are several ways to sell your business
Are you selling all or part of your business? How are you structuring the sale of your business - asset sale or stock sale?
3. Know your company’s value
There are many ways to measure your company’s value; hiring a valuation service is the best way to get an accurate valuation of your business.
4. Future plans will change your company’s value
Your strategy will affect the value of your company. The steps you take to grow and scale your operations come at an expense. Knowing how your approach affects the valuation will help you not only during negotiation but also executing your strategy.
5. Find a specialist in M&A such as a Valuation Consultant, M&A broker, and or Lawyer
Hire a trusted advisor to help you understand what your business is worth and the best way to structure the sale of your company.
6. Create your investment teaser
Ensure your business is being shown in the best possible light but does not explicitly reveal your company. You want the teaser to be informative but not give your buyers (who are sometimes competitors) the ability to decipher it is your business before signing an NDA.
7. Negotiate with multiple buyers to get the best conditions
Having multiple buyers compete will increase the price of your business. Your business’s valuation will vary from one buyer to another. Customize your business’s allure for each potential buyer, highlighting specific strengths and weaknesses that are better suited specifically for that acquirer.
8. Don’t underestimate Letters of Intent or Term Sheets
It’s a non-binding document but, you should negotiate it in detail as no-shop provision, adjustments to the price and payment conditions, and Indemnification terms. Involve your lawyer with documentation as early as possible. As much as possible, you should avoid drafts that buyer sides have generated as they tend to favor the buyers.
9. Fix issues as much as possible
Due diligence could uncover issues that you were not aware of or do not think are material. However, these findings give buyers leverage to discount your company’s value.
10. Keep the deal a secret
Rumors have the potential to make employees lose motivation and potentially cause the deal to fall through. You may need to ask some employees for help to obtain internal data but do this strategically, looping in employees you can trust.
