If you are a business owner, the decision to sell your business can be a difficult one. However, with the right preparation, you can increase the chances of a successful sale and make the process go more smoothly. Here are seven key steps you should take when preparing your business for sale:
Clean Up Your Financials:
Having accurate and up-to-date financial statements is crucial when selling your business. Review your financials for any errors or inconsistencies, and correct them as necessary. Make sure that your financial records are organized and easily accessible to potential buyers.
Dilute Your Concentrations:
Concentrations can have a major impact on both the ability to sell your business and the value of your business. Simply put, concentration equals risk, and risk devalues a company. Everything else being equal, a business with low client concentrations will be more valuable and easier to sell than a business with high customer concentrations. The same goes for goodwill concentration. An owner that is critical to every aspect of the business will devalue their business compared to an owner that dilutes goodwill across employees. Other concentrations could be vendor, product, and source of business, among others. You should review any concentration in the business and dilute those that pose a significant risk for a potential buyer.
Clean Up Your Legal and Compliance Issues:
Before putting your business on the market, make sure that you are in compliance with all legal and regulatory requirements. This includes having all necessary licenses, permits, and insurances in place.
Get an Independent Valuation:
An independent valuation is a professional assessment of your company’s worth. This will give potential buyers an idea of what your business is worth, and will also help you set a realistic asking price.
Find The Right Buyer:
Once your business is ready to go on the market, it’s important to find the right buyer. This includes identifying potential buyers who are a good fit for your business, who are well capitalized and are willing to pay an acceptable valuation with an acceptable deal structure.
Keep the Pedal to the Floor:
One of the worst things an owner can do in anticipation of a sale is slow down the business. It may be human nature but slowing down is opposite of what you should do. The key is to operate as if you are not selling. To continue growing the company. The best possible leverage a Seller can have is selling their business in a financial uptrend. It can be several months between the time an offer is received and when an actual closing takes place. Savvy buyers will ask for updated financials during this period. Taking your foot off the gas may invite a re-trade of the buyer’s original offer.
Hire an M&A Professional:
If you are unsure of how to go about finding a buyer, consider hiring a mergers and acquisitions professional. More specifically, M&A professionals that specialize in helping business owners sell their companies. They can help you prepare your business for sale, navigate the process, identify potential buyers, negotiate the sale and close the deal.
By following these steps, you can increase the chances of a successful sale and make the process go more smoothly. Remember to clean up your financials, dilute concentrations, clean up your legal and compliance issues, get an independent valuation, find the right buyer, keep the pedal to the floor, and consider hiring a professional to help you with the process.
Meridian M&A:
Meridian M&A professionals have a deep understanding of the M&A process and can provide valuable guidance and support throughout the sale of your business. We help identify potential areas of value in your business, help position your business for a successful sale and help ensure that you receive the maximum enterprise value possible for your business. Whether you are looking to sell your business today, or five years from now, we are happy to discuss your situation and help you develop a strategy for your eventual exit. Do not hesitate to contact us for a confidential discussion. You may also visit our website for additional information on the M&A process.