5 Tips You Must Know Before Selling Your Business!
Doing something for the first time creates a steep learning curve. Think about the lessons learned when starting to drive, becoming a parent or taking on a new hobby. At first, things were difficult but over time and through practice the curve settled down. You made mistakes but kept practicing and in the long run a level of proficiency was mastered.
Unfortunately, when you sell your business you don’t have the opportunity to allow the curve to settle down. There’s very little room for practice and mistakes can cause devaluation or even break the deal. You either get things right or you don’t and the latter can result in excess costs, time delays and sleepless nights.
Selling your business will most likely be a one-time event rather than a skill you can learn to master unless you set out to become a serial entrepreneur. That being the case, it’s imperative to understand how the sale process works, who the players are, what they’re trying to achieve and how to ensure you can maximise your sale value.
- Begin the sales process with the end in mind. Take a few hours away from the business, sit in a peaceful room and visualise what you ultimately want to achieve. If you don’t know where you’re going chances are that you’ll end up somewhere that you don’t like! Imagine the best possible scenario. Think about the amount of cash in your bank, the amount of time you’ll need to stick around post-sale and then really get creative and picture all the things you want to do once the business is sold. Once you’ve tried various scenarios, get a piece of paper and create a mind-map or vision board with words and/or images to encapsulate the end goal. Think about how you’ll feel and pretend that you’ve already achieved a sale – describe what you see, think and feel on paper. Keep this with you at all times. When fears or doubts come up refer to it.
- Maximise valuation by being prepared. When selling a house, buyers will look for reasons to negotiate a lower price. If the survey reveals a bad roof, damp or some kind of serious fault the buyer may reduce the offer or worse – walk away. Same goes for your business. Being prepared means taking the time to clean things up, get everything organised and put your best foot forward. To best be prepared don’t enter the sale process blindly – learn what you need to do look as attractive as possible before you place your business up for sale. (If you haven’t done so already, purchase the book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”
- Consider a range of sale options and make a commitment to yourself on what you will accept versus what you won’t. When a buyer takes a serious interest in you they’ll create what is called a ‘Consideration’ that outlines a potential deal. The amount of money you want is one thing to contemplate but that’s only one part of the Consideration. The deal can include cash right away, deferred cash, cash and options, deferred options, and on and on. Additionally, the offer might require an earn-out. This is where you have stay with the company for a set amount of time and hit specific targets to realise your pay-out. An acceptable consideration can be planned for – make sure you know what you want and create a strategy on how to increase your chances to get it. For example, if you want to avoid an earn-out, your strategy must be one that eliminates your value to the business before you sell.
- Pick your team carefully. Remember this isn’t a journey that allows for practice or making mistakes. The team members needed – Corporate Broker/Financier, Accountant, Consultant, Tax Advisor – play this game often. Even through they will work on your behalf, they may have their own agenda and objectives. Some will be right for you and others won’t. Research how best to compare services and match them against your end game. One wrong team member can ruin the whole process – don’t let this happen to you.
- Find a friend or mentor you can confide in when times get tough. Despite the fact that you may be eager to exit the business, it’s still likely to be an emotional journey. Life can get a bit bumpy when the professionals treat your business like a mere transaction, deal fever takes charge or a completion falls through. Have someone available that knows what’s going and can be on hand to coach you through the hard times and celebrate your successes.
Selling your business in the UK can be an exciting adventure that results in great success. It can also be a life-sucking nightmare. Don’t enter the process blindly – educate yourself through independent information rather than learning by experience alone.
Kim Brown, Co-Founder of Business Wand, helps business owners navigate their way through the start to finish process of selling a business. Her specialty is to help owners cut costs and increase profits prior to sale. To understand how you can sell your business quickly for the highest sales price, purchase the book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”