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Top 10 Negotiation Techniques to Use When Selling Your Business

Negotiation Techniques to Use When Selling Your Business

Negotiation Techniques to Use When Selling Your BusinessNegotiation Techniques to Use When Selling Your Business

Imagine having to explain to an alien the concept of money. There was a time when this meant that bits of paper and little metal discs equated to a value of so many items of food, clothes, vehicles and so forth. Now with credit cards, electronic transfers etc figures on a screen equate to value.

The point is that someone somewhere along the line decided these things had value and had to explain that. Likewise when selling your business it is up to you to find a way to show why your personal pride and joy that you spent years working on is worth someone taking off their hands. With these Top 10 Negotiation Techniques you can get the maximum amount when you want to move on to pastures new.

1. It’s Not All About The Money, Money, Money

It may seem counter intuitive but dropping prices is not always the best way to get people on side in a negotiation. Indeed sometimes pitching a lower price can devalue what you have.

Here’s a real life example:

A film maker goes to a potential backer with an idea for a film. He says that he can make this film for around £50,000. In his mind because this idea is brilliant and relatively low cost surely a business savvy investor will cough up, right?

Except in this case they didn’t. Film investments are notoriously risky and the people putting the money in want something that they think will make money.

So the film maker went to another meeting. This time the project was pitched at £2 million. And sure enough at this meeting his idea was taken a lot more seriously.

The point of this story is to look at the value of what you are offering to a potential buyer. Explain to them why you have set the price and only drop the price if you need to!

2. Aim high

“You should always aim high. What if you have low aspirations and goals in life and you don’t meet them?” Ricky Gervais

It is important that you do not misunderstand this one. Yes you want the best possible price. This is not the same as giving them a wildly unrealistic value just the highest possible calculations to give you the best deal.

You want to be able to start off high so you can move further down if you need to!

3. Do your research

When negotiating it helps to be prepared for the questions they are likely to throw at you. However this is not just about finding out what they will ask about you it is also about finding which of their buttons are the right ones to push!

For example, say you go on their website and it says they are looking to “expand into the Asian market.” If your business is particularly popular in that area you could say “Well if you buy our business this will benefit you more in this market because…” Take note of anything that could give you the upper hand!

4. Don’t split the difference!

It is the easiest option and the simplest of negotiation techniques- they have their figure, you have yours, meet in the middle. The problem is that meeting in the middle is not really what you are going for. Hold out for a little bit more!

5. KISS (Keep It Short And Simple!)

Deals can often get complicated and it is this that often causes those annoying frustrations and delays that end up hijacking negotiations and slam you straight back to square one!

Whoever you are dealing with try to spell out what you want and do your best to talk about minor niggles and worries as soon as possible so you can focus on the “This is the business, this is how much I want for it” part!

6. “Don’t give me problems, tell me solutions”

It is easy to define a negotiation as “us and them” If someone has concerns be proactive and find someone who can deal with an issue. For example if they give you a technical question you don’t know the answer to, find the tech guy and get them to answer it as soon as possible.

It may be a cliché but when it comes to selling a business time really is money, especially wasted time!

7. Give and take

While you want to get the best deal you also need to have a few tricks up your sleeve in order to make sure it goes through. If you are too tough with your negotiations people may end up walking away and then you have to start all over again!

For example, someone may want to buy your business but do not want to purchase your stock that is more than a couple of years old. You could say “Alright that’s fine then but in which case we’ll have a clearout sale and make money from that to fund our next venture.”

As ever in life it’s a question of balance- get the best price you can but don’t be afraid to throw in the odd freebie too!

8. Make the first offer

Common wisdom suggests that you ought to wait for your buyer to give you a figure and make the first move. However sometimes it is better to take the initiative and tell them what you want first. If they go for it then you could potentially save yourself a lot of time!

9. Know when to walk away

If you have done your sums right then you will know the most you would like to sell your business for and the lowest amount you are prepared to sell it for. Do not be afraid of walking away if a deal isn’t right. Trust your instincts! (Check out the ‘Calculate Your Walkaway Price’ Pack at our Store)

10. No table thumping!

There is a difference between being assertive and aggressive. Do not say that any terms are “non-negotiable” or insist on a deadline. Most deals go through when both parties are prepared to work together and come up with the right agreement. Subtle persuasion works better than tea cup hurling!

In short these negotiation techniques will help you to maintain the right atmosphere when discussing deals but more importantly will give you a better chance of selling at the right price. Good luck!

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”

 

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And The Best Time To Sell A Business Is…

The Best Time To Sell A Business

The Sale Process Stages & Best Time To Sell A Business

The Sale Process Stages

Most businesses are for sale if the price is right.  When someone asks, ‘Is your business for sale?’ I recommend you say yes. It doesn’t cost you anything, and it keeps the opportunity open for further exploration.

(Note: This is in excerpt from Chapter 1 of  “How To Sell A Business: The UK’s #1 guide to maximising your company value and achieving a quick business sale.” Get the whole chapter for free by filing out the form to your right)

Exploring opportunities is one thing; entering into the business sale process is another. You definitely don’t want to go into it lightly. The process is costly and mentally and physically draining. It’s not an activity to enter half-heartedly by either the seller or the buyer. A high level of commitment is necessary from all parties.

The actual sale process may be longer than you think, and it involves a number of stages in order to maximise your valuation. The stages are as follows:

  • Making the decision to sell
  • Preparing your business for sale
  • Getting the right business sale team in place
  • Going to market to find a buyer
  • Carrying out successful due diligence
  • Completion Day and the after-party
  • Communicating the successful sale to the market

When is the best time to sell a business

In an ideal world, the best time to sell a business is when your business is on the up-and-up, still growing with a strong order book, running efficiently, managed effectively, and the going is good. The trick is to recognise this point as it approaches, and make the most of the window of opportunity when it arrives. My business partner and I always looked out for this window, and our indicators were our scarcity in the market, the number of clients with which we had contracts, the volume we were processing, and forecasting over the next few years. Even though we recognised the window of opportunity when it came along, we were a little late. This was partly because the business was going really well and everyone was enjoying themselves, and partly because our business sale process took longer than we expected.

The indicators for your business are likely to be different, taking a number of different factors into account, such as scarcity of your product and services in the market, the market size, future opportunity, profit margins (are they growing or shrinking?), and where your business is in the market cycle. It could even be that you have gone to see some venture capitalist (VC) companies who told you that you need a larger order book.

TIP: To make sure you don’t miss the boat, define the indicators to look out for, which show when the best time to sell is approaching. Make sure this is checked regularly, so have it as an agenda item at your board meetings.

If you are in a market cycle that doesn’t have a ‘best time to sell’ period coming up for the foreseeable future, it could still be the perfect time to sell. Just remember to choose your ‘ready to sale’ point very carefully by taking the calendar into consideration (more details in Part Five of the book — When should we go out to market?).

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale

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Sell Your Business – Data Room Index

Data Room Index

What should a Data Room Index look like?

When considering selling your business, you may hear mention of a Data Room. Since this is something specific to the due diligence process of a business sale or a project bid, your first question may well be “what is a data room”? And following after, you’ll then wonder what a data room index is…

What is a Data Room?

Data is the key to confidence on the part of a potential buyer, being an important factor in the agreed price – and indeed, whether or not a sale goes ahead at all. A data room is often used to help with this aspect of the process.

As a business vendor, you will want to make sure that your potential buyers have access to as much data about your business as they need, in order to make their decision, and to value your business fairly. At the same time, you may well have understandable concerns about the confidentiality of the data. After all, you certainly wouldn’t want commercially sensitive data to be sent around insecurely, with the risk of its being passed on to unauthorised parties.

This is where a data room comes in. The practice of using a data room dates back many years, and has traditionally been a specific room where all of the relevant data is kept for inspection by the bidders. The room is carefully monitored, with the purpose of ensuring that the data is only inspected there, and that it doesn’t leave the room insecurely.

As time has moved on and technology has advanced, the concept of a data room has become increasingly computer-based. If a physical data room is used, it’s likely to contain secure computers owned and controlled by the vendor (or their data room service provider). These computers can be used to view relevant data on-screen, but won’t be linked to the internet and won’t permit copies of files to be made or e-mailed.

In the past few years, though, virtual data rooms have become more popular, as they do away with a lot of the costs and logistical requirements of physical data rooms. A virtual data room is essentially a secure website, carefully controlled with authorised log-ins and data encryption, that allows access to all of the files that would traditionally have been available in the physical data room.

There are several benefits of using a virtual data room, including that authorised users can access it from anywhere with an internet connection, so there’s no longer any need for a dedicated room or physical security. It eliminates the need for bidders and advisors to travel to a particular location, so it reduces costs and allows inspection to be done at a time convenient to the due diligence team. This is especially useful when considering international acquisitions.

Unless your business already operates in the area of secure technology, you will almost certainly want to have a virtual data room set up for you by a specialist provider. They will ensure that only authorised users have access to the data, and that digital rights management restrictions are applied to documents so that they cannot be copied, forwarded or printed without specific permission.

When selecting a provider, ask for assurances that they have dealt with clients in your sector before, and check that they fulfil relevant audit and compliance requirements such as the International Safe Harbor Privacy regulations agreed between the United States and the European Union. You will certainly want them to offer security features such as digital watermarking, 256-bit encryption, two-factor authentication login, and customisable security clearance levels for users.

And what about this Data Room Index (or file structure)?

Your virtual data room provider should be able to advise you on a suitable data room index or  file structure for the users to access, but when setting up the files, it’s helpful to consider the whole thing from the bidders’ point of view. You’ll want to ensure that everything they are likely to need is provided in the data room, so if in doubt, ask your own lawyer to get hold of (or create) the kind of checklist that a bidder is likely to use when undertaking due diligence. (You can also purchase our Data Room Pack at our store or visit our freebie’s to see our ‘Data Room Structure Sample’). The exact information to be provided will vary a little from sector to sector, but as an example, you’ll want to include the following in your data room index:

Legal – Certificates of incorporation, memorandum & articles of association, share registers, shareholder transaction listings, minutes of board and shareholder meetings, records of any lawsuits or legal proceedings, etc.

Financial – Statutory accounts, management accounts, asset registers, leases, land and building title deeds, finance policies, authorisation levels, etc.

Regulatory – Licences, certifications, registrations, official inspection records, etc.

Human Resources – Organisation charts, employment policies, salary structures, payroll records, employment contracts, staff turnover reports, etc.

Make sure that the files and folders are set out in a logical, intuitive way, and be sure to include contact details so that bidders can get in touch with your key people to confirm key information.

You will find that you can make life easier for yourself if you prepare for this process in advance. To a large extent, these documents are not unique to the sale process, but constitute the data that any business needs to be well-run, so you can prepare yourself for the data room by keeping good records of all of the above areas of operation. Then, when it comes to the data room process, you and your advisors can work with data room provider to ensure that your bidders have all the data they need – and maximise their chances of making bids that reflect the value of your business.

If you’re considering selling your business, you need all the help you can get, so check out the Sell Your Business Store to get an idea on how we can help you out.

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale

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What is Due Diligence in Relation to Selling a Business?

Due Diligence

What is Due Diligence…

Nobody undertakes the buying or selling of a business lightly, so to find out as much as possible about their potential purchase, a buyer will perform extensive research, known as a due diligence process. This will help them to decide whether or not to go ahead with the purchase, and if so, what level of price they should offer.

There are several reasons why due diligence is undertaken:

The first is simple commercial sense. Committing a large amount of money to acquiring or merging with an unknown company would clearly be far too great a risk, so the more information that can be gathered, the more that risk can be assessed and reduced. Setting a price for a purchase can be a difficult decision to make, based on several factors, so the more information the buyer has, the more confident he or she can be in a proposal.

The second is as “cover” for the decision to be made. The more a purchaser can demonstrate to their managers, financiers and/or shareholders that they went through a due diligence process designed to uncover all aspects of the target company’s operations, the more they can show that the decision was a sound one, especially in cases where there might be commercial difficulties later on.

The third reason is for legal and regulatory compliance. Commercial law in all developed countries requires that shareholders’ funds are protected as far as possible by the process of due diligence, and buyers must follow certain minimum processes to ensure compliance with the legal requirements.

In his book “Due Diligence, a Strategic and Financial Approach”, Luis Gillman sets out nine key aspects of good practice for due diligence when considering buying a business:

  1. Compatibility audit – in which the researcher should explore how well the organisation’s operations are compatible with the buyer’s own company
  2. Financial audit – during which a detailed review will look at all aspects of the target company’s financial position, including looking at published and unpublished accounting information
  3. Macro-environment audit – reviewing the position of the target company in its market, and the prospects for future profits in that sector
  4. Legal/environmental audit – due diligence to ensure that there are no “nasty surprises” regarding potential lawsuits or environmental concerns once a sale is made
  5. Marketing audit – examining the strength of the target’s ability to sell its products and services
  6. Production audit – looking at the quality and quantity of goods and services produced, and how they serve customers
  7. Management audit – reviewing the strengths and weaknesses of the current management structure (bearing in mind that this may well change if a purchase is made)
  8. Information systems audit – to ensure that the company is maximising use of technology, or identifying areas where improvements could be made
  9. Reconciliation audit – bringing all of the above audits together to complete the due diligence process, to make a final decision as to whether the vendor and the purchaser are a “good fit” and whether ultimately, there will be added value to an acquisition.

A buyer will probably only follow all of the above processes in cases of large and complex mergers and acquisitions, and it may be enough for more straightforward business processes that the due diligence process covers only some of them.

Usually, the buyer will rely heavily on the advice of advisors when going through the due diligence process, and this work forms a large part of the expertise of commercial lawyers, accountants, bankers, brokers and other financial advisors.

Due Diligence Performed on You (the Seller)

As a business owner looking to sell your company, you will need to provide as much information as the potential purchaser needs to complete the due diligence process to their own satisfaction. The usual concerns you will have about keeping information confidential do need to be set aside to a certain extent, because a buyer can’t be expected to make a decision based on a partial picture. To protect yourself, it is normal business practice to get your lawyer to draw up a due diligence confidentiality agreement for buyers to sign, preventing them from copying or sharing the information you provide – and crucially, to prevent them from taking action upon it should they decide not to go ahead with the purchase.

It’s a good idea to ask your lawyer or accountant to give you an idea of exactly which documents the buyer is likely to want to see, before the due diligence process begins, so that you’re prepared with all the information. This should help to speed up the process and prevent delays caused by requests for missing information during due diligence. (Check out our Store to find resources that can help you with Due Diligence)

Due Diligence You Perform on the Buyer

Similarly, you will want to perform some due diligence yourself as a vendor. Due diligence is, to some extent, a two-way street, and although you wouldn’t need to go through as much detail as the buyer, you should ask your advisors for help to ensure that the buyer at least has the means to pay the asking price. If the purchase involved the offer of their own shares as well as cash, then of course you would need to do more work to ensure that they were really worth the amount that the buyer claimed.

Joanna Miller helps business owners navigate their way through the start to finish process of selling a business.  Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale

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Living in the business exit void

Business Exit

Business ExitThe Business Exit Void

Whenever I was asked, ‘what will you do after you sell your business,’ I always responded that I’d start a new business but do it better, quicker and easier. I knew that once I completed my business exit I’d take a 10 day holiday and then start building a new empire.

Goes to show you how much I know myself (or don’t know). After my business exit I dabbled in a bit of this and a bit of that. I went to meetings, considered consultancy, attended a monthly business club, wrote a book on the nature of reality, became a Day Skipper (yachting), started being an at-home parent, set up a website and another and another and soon settled into a void. Nothing seemed to excite me. I would create a business plan or empire and then the following day think, ‘no…I don’t really want to do that.’ My plans to start on a new adventure didn’t seem to materialise.

Luckily I had enough money to coast for a while so finding work wasn’t a short-term necessity. But after several months I wondered if I was lazy – perhaps I didn’t like to work. Perhaps the only reason I did create a successful company was because I was in it for the money. And if that’s the case am I going to have to bumble along until my money runs out and I have nothing to show for all my hard work. (Can you see a crisis coming on?)

I’m sure there are many business owners that exit and know exactly what they’re going to do but this ex-business owner became a lost sheep. I had defined myself so much by my previous job that I didn’t really know who I was, what I wanted or even what I really enjoyed doing. By the time of my exit I was disillusioned with the business world. Part of me wanted to buy a house on Fiji and become a Yoga guru and another part of me wanted to get my mojo back and start something fun and interesting. I didn’t know what I wanted nor did I fully understand my options. I didn’t know what I didn’t know!

Rewind a year previous and I felt stuck, trapped, undervalued, and overworked. Yes – it was my company and yet I felt stifled by it. I wanted to be free! And then after almost a year of negotiations, uncertainty, doubts and sleepless nights my wish for freedom came true. Free at last. Now what?

The reasons to exit and the business exit process can be so consuming that life after the business doesn’t get attention. And perhaps that’s okay. Since my departure I’ve done a lot of soul searching and can honestly say that I now know what it means to follow my heart rather than my head. Rather than doing what I was good at, I took a back seat and let my boat drift around while taking stock on what I liked, didn’t like and where I wanted to go.

It’s taken over a year for me to get my mojo back but this mojo is different. Rather than jump into doing what I’ve always done, I’ve taken my time and changed my entire lifestyle. I’ve gone from being a control freak stressed business owner workaholic to a calm, centred enthusiastic entrepreneur with a portfolio of fun and interesting projects. I’ve learned how to create a life I want to live rather than work endlessly to enjoy a life later.

So whether you are just starting out on your business exit journey or are nearing the end I thought I’d share my living in the void story with you. At least if it happens, you’ll have the comfort that it’s not just you.

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”

 

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Should I Tell My Partner I’m Selling My Business?

Selling My Business

Selling My BusinessGuess what honey – I’m Selling My Business

When I told my husband that I wanted to leave my business he thought I was ‘going through a phase.’ A few months later when I told him that I resigned as an employee he started to take me serious. Before my dramatic upheaval, everything seemed perfect in our lives. We had a nice big house, a beautiful 2 year old, holidays to the Caribbean and the security of a nice pay cheque and growing business. In fact, the company was so prosperous that my business partner and I had been taking out 10k/month, for over a year, to reduce our shareholder loans. Life was good, but I wasn’t happy.

I’ll save my detailed reasons for wanting to leave for another article, but to sum it up after 8 years I was bored, tired and in need of a lifestyle change. That aside, when I told hubby I quit my job he freaked out. In fact, I think he walked around stunned for 3 months. He couldn’t understand why I would ‘throw away all my efforts just like that.’

Fortunately, my exit was less painful than most – at least regarding the transaction. I wanted to sell the company yet my business partner wanted to keep it. To make a long story short, he purchased some of my shares, I quit the company and the rest is history. The journey from A to B however was a rough ride.

Do I regret telling my husband? No. I suppose I had to tell him. I was the main breadwinner so it would be unfair not to. Furthermore, I didn’t have the benefit of hindsight. I had no idea what the end result was going to be.

On the flip side, if I kept it quiet and after the journey ended, said, ‘Guess what honey – we now have quite a bit of money and I can spend time with you and baby Sienna, but I’m no longer a majority shareholding in my company,’ I’m sure his response would have been very positive.

The amount of business owners I know that have kept the sale secret is substantial and I can see why. And often after a first failed attempt, the amount of secrecy increases. It’s hard enough to prepare for an exit and endure the emotional roller-coaster but to add to it your partners’ fears and worries can often cause insanity. I might seem a bit dramatic but selling a business (or exiting your business) can be heart wrenching. All the time, money, love, dedication – your whole life wrapped up into back and forth negotiations over a sum of money and a way to walk away. And to make matters worse, it’s difficult to think of a future when your present is so tied up in such a large transaction.

So if you’re not sure about when or whether to tell your partner/spouse the business is up for sale, consider asking yourself these questions:

  • Can your partner handle dealing with uncertainty?
  • Will your partner be able to support you rather than add to the pressure?
  • Will your partner be upset if you don’t tell him or her?
  • Can you tell your partner in a way that helps them to feel comfortable with the plans?
  • Will your partner have a serious adverse reaction if the sale falls through?

If you do choose to tell your partner your plans, the one thing I would recommend is to keep quiet on the offer amounts. It’s bad enough if you sell for £3 million when you initially expected £10 million but adding your partners’ disappointment makes things even worse. Furthermore, I’d set the expectation that these things take a course of their own – selling a business can happen fast and you can get the value you feel you deserve or it could take ages or not happen at all.

And a final bit of advice, whether you tell your spouse or not make sure that you have someone in the business community that can act as an independent mentor throughout the process. Either a business ‘white-hair’ that has seen it, done it and has the t-shirt, or a business minded friend that can help you along the journey.

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”

 

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Life After Selling A Business

Life After Selling A Busienss

Life After Selling A BusinessSelling your business – Define your life after selling a business so you know your aiming for

Business owners choose to sell their business for a variety of reasons. Some want to move away from pain and others are interested in moving towards more pleasure.  One business owner might want to escape personal exhaustion whereas another is eager to seek out a new exciting challenge. Some owners might feel forced to sell for personal reasons (health or relationship issues) and others might think it’s time to cash out before the business peaks.

Regardless as to the particular reason for selling it’s imperative to spend time defining what life after selling a business will be like. In other words, the sale is not the end goal – it’s a milestone towards a new life.

Imagine that you and I are sitting in a coffee shop a few months after your business sold, what would your likely response be to the below questions? Pretend that everything went perfectly and you’re now living your ideal life. With that scenario in mind, answer these questions as if they’ve already happened:

  • What’s your life after selling a business like? How do you spend your time? How do you feel about the activities that have replaced your old life?
  • How’s your health? How do you feel about your health?
  • Who’s in your life – what relationships do you have, what do you do with them and how do you feel about them?
  • How do you feel about yourself? Do you like who you are? Do you like this new lifestyle?
  • Are you enjoying the fruits of your labour? If yes, what are the results of cashing in? (What have you purchased, how has the money impacted your life and how do you feel about it?)

Contrary to what most people believe, life does not progress in chronological order. Life actually starts off with your end result and then your life progresses to meet that end result.  In relation to actually selling your business, it’s important to think about a smooth business sale process in addition to visualising your completion party but that’s not really the end goal. That’s just one step towards the new lifestyle you’re seeking out.

The end goal is your post-sale lifestyle that you hopefully took the time to think about by answering the above questions. The way that life works is that you define what your ideal life is and then you go out into the world, take action (any action) and things, events, people fall into your path to direct you to your predetermined ideal life.

If you haven’t determined the end result, then you’ll most likely continue living and feeling the way you do right now, however the stage props might be different. Instead of having a business around you, you’ll have some other surrounding.

If you’re struggling with this concept, think back to any large success that you’ve achieved. To achieve that specific success (and not something different) you must have defined it. You decided that you wanted X and then set in motion to achieve X. Depending on your beliefs about reality, you went on a smooth or bumpy journey yet eventually arrived at the end result. Selling your business and transitioning into a new life is similar. Decide what you want, feel what it feels like to have it and then go out and take action.

This is the number 1 most important step in selling your business. If you keep doing/thinking what you’ve always been doing/thinking, you’ll get the same results. A fantastic lifestyle change is there for the taking and all you need to do is just claim it.

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”

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Selling Your Business – The 12 Step Sale Process

Selling Your Business Steps

Selling Your Business StepsTwelve Steps to Selling Your Business.

The business sale process is quite straightforward. Provided you’ve prepared for the sale, the journey can be a fun adventure. Listed below are the 12 steps that take over after the preparation stage is complete. These steps also assume that your business sale team is in place. The core team members include a business broker (corporate financier), accountant, corporate solicitor and personal tax/financial advisors. At the end of this process the ideal outcome is to pop the champagne and celebrate a successful completion and business exit.

  1. Create a list of buyers. Your broker will help you brainstorm a large list of potential buyers. To increase the chances for success the larger the list the better. As with any negotiation, competition helps to increase desire and with increased desire comes higher offers.
  2. Create the teaser letter and prepare for issuing. Your broker will create this for you. This is a short letter outlining the broad opportunity. It explains the type of business, top-level figures like profits and revenue in addition to reasons for sale and overall opportunity. At this stage your company won’t be named.
  3. A potential buyer expresses interest. After receipt of the teaser letter, interested parties will get in touch with your broker to express a desire for more information.
  4. Get a Non-Disclosure Agreement (NDA) signed by any interested party. Before your broker tells the interested parties your company name or any more details, a NDA agreement will be signed. This is a legal document that aims to ensure the interested parties keep all materials and information related to the opportunity confidential.
  5. Send the Memorandum of Information (MOI) to any interested parties. The MOI will be written by your broker and is similar to a business plan. It should be around 20 pages long and showcases your business in the best light possible. The document will include your business history, organisational structure, employee bios, shareholdings, customer and markets, sales and marketing, product and service descriptions in addition to financials.
  6. Potential buyer proceeds or drops out. During this step your broker will be contacting all interested parties to determine if they’re interested in proceeding.
  7. Meet the potential buyer face-to-face and give a presentation. This important meeting is often held at your broker’s office or a venue off-site. Generally, the presentation is another version of the MOI spread out into around 10 – 15 slides. Presentations are often targeted to last for a half hour and then open up for discussion.
  8. Indicative offers received. After the presentation stage, your broker will filter through offers. It’s very important to have your personal tax advisor/financial advisor on hand during this stage. Some offers look great but may actually leave you worse off than others.
  9. Shortlist potential buyers. Hopefully you’re flooded with offers and are able to easily shortlist the potential buyers to a few that seem most appropriate for the business. Eventually, you’ll need to choose one and proceed through to completion.  Most buyers will ask for exclusivity at this point as they don’t want to pay the price of due diligence only to lose the sale.
  10. Due diligence is performed. The potential buyers will have teams of people scouring your business to uncover every detail. The process isn’t finished until every stone is unturned. You’ll find yourself filling out spreadsheet questionnaires from one buyers’ department only to be asked the same questions from another team.
  11. Final offer letter(s) are issued. Provided that you are prepared, disclosed any issues upfront and are maintaining forecasted figures your offer shouldn’t be too far from the indicative offers provided in step eight.
  12. Completion. For the final stage you and your team will meet at the buyers’ solicitors office. There’s usually several rooms put aside. One room for signing, one for the buyers’ team and one for your team. There will also be rooms for negotiation and another room for private conversations. If all goes well, the papers are all signed and you finish the day with a celebratory glass of bubbly!

This process can progress smoothly. It can also cause your life to be a living nightmare. The best thing you can do is prepare, prepare, prepare. Find out what you need to do to make sure your business will get the highest valuation and ensure the sale process goes as smoothly as possible. Download your FREE chapter and get started today: “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale – FREE CHAPTER.”

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”