Scope the process before you start
It sounds simple, but selling a business doesn’t just mean putting ads in the right news outlets and waiting for an offer – there’s more to it than that, and that’s even without factoring for that coronavirus making everything more unsettled.
To get the sale price you want, one that reflects all your hard work and initiative, you need to do a few things to prepare, including getting a valuation, sorting out internal problems, tidying your books, preparing a confidentiality agreement and a business summary, and planning your exit strategy. These steps are even more important in the uncertainty of a global pandemic.
Before you start, set yourself and any buyers a deadline a few months ahead so everyone has enough time to get ready for the transaction.
Here’s what else to do:
Get a valuation
You might know how much your business is worth, but can you back that up? For more confidence about your asking price, talk to a third party about a valuation. For a fee, a professional valuer compares your business with competitors, and all incoming and outgoing transactions are factored in along with any debt and/or assets. This is worth the investment – anyone interested or involved in the sale, including potential buyers and their finance companies, will want a copy.
Address off-putting issues
Scan your business for anything that might put buyers off – getting them sorted before you go on the market could bump up your asking price. That might be renovations or repairs still unfinished, undocumented training processes or licenses and contracts that need renewing. Your valuer might help here by noting issues you may not be aware of.
Get your books in order
If you haven’t got complete financial transparency, plenty of buyers won’t bother to ask for it – they’ll just move on to the next opportunity. With the help of your accountant or financial advisor, get all your financials up to date and set out for buyers to see. That includes three years’ worth of tax returns, profit and loss statements, bank statements, copies of leases and a list of the equipment that goes with the sale.
Draft a confidentiality agreement
Before you reveal your financial information to buyers, you’re wise to ask them to sign a non-disclosure or confidentiality agreement. Talk to your lawyer about drafting this document to keep all parties and your private business information safe.
Prepare a business summary
Along with your financial disclosures, potential buyers will want to know all about your business, including its location, number of employees, when it started and what area it services. You can include your reason for selling, a rundown on your competitors and any training you can offer after the sale. Gather all these into a succinct document no longer than two pages, and give potential buyers a copy.
Plan how you’ll leave
You almost need to do this first, before you even think about selling. Outside influences (think COVID-19) can dictate the timing of a sale, and if you already have an exit plan you won’t be caught unprepared or forced to sell at a loss. A financial adviser can help you decide on the details of an exit plan – when you’d like to go, who you’d like to take over the business, any tax issues and whether you want to stay involved at some level after a sale or handover.
Look before you leap
Selling your business is a big move, more so during a global pandemic, and to get what you want out of it takes planning. Enlist the help of professionals for these preparatory steps – a valuer for an in-depth look at your business position, your accountant to make sure your books are tidy, your legal advisor for that all-important confidentiality agreement. Above all, plan your exit carefully with help from a financial advisor so when you do decide to sell, you’re in the best position to bow out.
