10 Keys to a Successful Business Sale
You started your company twenty years ago in your tiny apartment and worked tirelessly, especially in the initial stages to get the business off the ground and successful. Over the years, the company has grown and has become a household name in your town, resulting in you feeling a deep sense of accomplishment and pride in what you were able to achieve with the business. This business has allowed you to live your "American dream" and also to contribute to the development of your community. You are however now at a point where you are considering selling the business and want the maximum return for your very successful company; we will examine ten key factors to consider to get the best deal when selling your business.
1. Don't Wait Too Long
Timing is one of the most critical skills for business success and is also essential when selling a business. To maximize the returns for your business, you need to sell when the economy is in expansion mode. During this time, businesses are seeking to expand, which will result in greater interest in buying companies. You will, therefore, have more bidders for your business and this will increase the likelihood of getting the best value for your business.
2. Prepare Yourself for Life After Business
Before selling the company that you have operated for the past twenty years, you will need to decide what your next steps will be. Whether you are going to start another business, start a philanthropic foundation, retire and travel the world or spend some more time with your family. You need to have clear-cut plans for your future after selling your business to free your mind from the company and embrace your new journey in life.
3. Spruce Up Your Company
If you want to maximize the returns from the sale of your company, you will need to ensure that the business is in the possible condition to be taken over and seamlessly operated by a new entity. Four ways to spruce up your company for sale include:
- Engage the services of a Certified Public Accountant (CPA) to review your books
- Try to decrease the focus on clients (if highly concentrated)
- Succession planning – identify key people within your business
- Be aware of market opportunities – have a well-researched business plan
4. Keep Your Eye on the Ball
When you are considering selling your business, it is essential that you keep your operations going as usual and not make wholesale changes or announcements. If this is done, it might affect your negotiating leeway with potential buyers.
5. Involve Multiple Buyers
It is always noteworthy to engage various potential buyers when trying to sell your business. This allows you to hear different offers and counter-offers and select the proposal that is most suitable for your business. If you engage only one potential buyer, it reduces the likelihood of you getting the maximum value for your company.
6. Hire a Mergers and Acquisitions Firm
One of the advantages of doing business today is that there are specialists available to assist with all aspects of businesses. Hiring a Mergers and acquisitions company will help you to get the best deal for your business when selling.
7. Engage Other Professionals with M&A Experience
You might have one of the most dedicated Financial Controllers in the world that has served your business with distinction for a long time. This person, however, might not have any experience in mergers and acquisitions and therefore not be able to advise you on the best accounting procedures such as whether to go with a stock offer or a benefit buy when selling your company.
8. Have Reasonable Expectations on Sales Price and Terms
When planning to sell your business, it is crucial for you to have an idea of what the fair value of your company is. There is a range of selling sales price for businesses of a similar size in your industry, and your aim should be to get a price at the top end of the range.
9. Provide Full Disclosure
Throughout the process of negotiating the sale of your business, you must be entirely above board and disclose all aspects of your operations. Doing this will negate the possibility of the buyer obtaining information from other sources which might result in a full review of all prior negotiations and also raise credibility issues.
10. Be Flexible and Open to Creative Deal Structures
The ability to be flexible and receptive to change is a trait that is critical to staying relevant in business today. When negotiating the sale of your business with potential buyers, you might have a particular price in mind and also how you want to be paid.
For example, your gross selling price might be 18 million dollars, all in cash at the closure of the deal, however, the market might not be in a position to provide you with this offer, and the best deal that you received is $15.1 million cash at close. What you can do in this situation is counter with an 8-year seller balloon note of $4 million at 8.5% and $14 million cash at close, this will give you more value than you initially sought and will also save the buyer some valuable cash, which is a win-win for both parties.
About Flatirons
Flatirons Capital Advisors, LLC (www.flatironscap.com) is an investment banking firm that helps privately held companies sell their businesses, acquire other businesses, and raise capital. Our unique business model affords sell-side advisory clients the ability to improve their company's performance, earnings, and effectiveness in the short term, while simultaneously increasing their market value for a future sale. Flatirons has offices in Colorado and Texas.
For more information: Call 303.905.0733, or email info@flatironscap.com.
About Flatirons Capital Advisors
Flatirons Capital Advisors, LLC is an investment banking firm that helps privately held companies sell their businesses, acquire other businesses, and raise capital. Our unique business model affords sell-side advisory clients the ability to improve their company's performance while simultaneously increasing their market value for a future sale.