Are you considering selling in the next couple of years? Planning ahead can make a big difference. Chances are if you’ve made past the first two sentences the idea has at least crept into your mind.
This is no means an exhaustive list and depending on your industry there may be a few here that do not apply but below are a few general tips to make your business ready to sell:
1. Think from the buyer’s perspective.
It’s funny how often the simplest things are the easiest to overlook. While this piece of advice is far from ground-breaking keep in mind you need a willing buyer to be able to sell. Consider the transaction from their point of view the pros and cons of your business and if there is any way to reduce cons and boost the pros. If you’re having a little trouble, consider asking yourself:
Would someone else want to buy your business? If the answer isn’t yes to this question think about what you can do to get that to yes.
What would make a buyer hesitate with my business? Are there any weaknesses you can shore up before going to market?
What are the good things about my business? Being able to express what makes your business unique to a buyer can help.
2. Are you replaceable?
I know deep down we all want to feel we can’t be replaced, but all buyers are hoping that you can be replaced. If possible, take steps to make the business less dependent on yourself will make it more desirable for any future buyer.
Some things to consider that could make the business less dependent on you are:
- Document your processes. Either writing down steps for your processes or using software such as Loom to record your actions will help any future buyer get up and running fast. That sticky note next to your monitor doesn’t count, make sure they are well detailed.
- Offload responsibility. That task you have been meaning to delegate but haven’t had the time to. Make the time now, it will come back in spades.
- Is a management team in place? Are you stretched to capacity and your departure will make it tough for a new owner to keep up? Consider hiring a second in command or promoting internally so you can have someone a new buyer can lean on for help.
- Don’t exclusively handle the supplier/customer relationships. If you have key accounts that you’ve been handling for years, consider bringing other members of your team into the equation. If they have a relationship with your business instead of you that’s more valuable to a future buyer.
3. Know your numbers.
Know what you would like to exit for but equally important know what the market says your business is worth. A proper valuation should take time, expertise, and consider all aspects of your business and your industry. Having this done professionally can be a valuable tool to defend your listing price to potential buyers when the time to sell comes. Further if the valuation comes out below your desired sale price, it can be used as a guide to show what areas need to be improved to get to your target price. Pacific M&A Business Brokers close 95% of our transaction within 5% of the price we value at, no cocktail napkin is going to get you that.
4. Start planning and making changes early.
Chances are if you have made it this far down you are at least mildly interested in selling your business. Start making changes now because the earlier you start planning for your exit the better position you will be when the time comes.
5. Reach out to a business broker.
When I first looked to sell my business, I thought the main value a broker brough to the transaction was finding a matching buyer. This couldn’t have been farther from the truth. While brokers do help find and screen buyers on average a business broker can add as much as 20% to the value of the transaction.
There are countless roadblocks and bumps along the way that if you don’t have an experienced broker to spot them before you reach them can derail a deal and additional legal and accounting costs to your deal. Not to mention how mentally and emotionally exhausting the entire process can be while trying to run the business at the same time.
Having a business broker can ensure you don’t get distracted by the prospect of a deal and let your business faulter in the meantime. We let you stay focused on your business during this critical time. A good accountant should add more value than their fees, a business broker is no different.
Curious about what your business is worth or have more questions about what you should do to best position your business for a sale? Reach out and speak with the knowledgeable, experienced, and trusted brokers at Pacific M&A and Business Brokers Ltd.