So, you have finally made the decision to sell your business which is a very big consideration, particularly if you have sweated blood and tears to build it up from scratch. You want to be able to maximise the benefits of selling your company and in order to do this, there are a few top considerations to bear in mind.
Review your business assets, contracts and processes
What you are aiming to do is get the most value out of the company and to critically evaluate your current business plan and strategy. To an outsider, there may well be areas where key contracts and assets are not as clear as they could be. It can be difficult to take an objective look at something in which you have invested a lot of time and effort, but you need to take a step back. Ask yourself, for example, if the company books stand up to scrutiny to a new investor or buyer? At this point, it is definitely worth the effort of bringing in external specialists in mergers and acquisitions. They will be able to provide you with a review of key assets, contracts and business processes which will highlight any anomalies and prepare you for negotiations with interested buyers and investors.
A professional company will also be experienced in carrying out a robust legal analysis of the business, including areas that will need attention such as intellectual property arrangements, employment contracts, financial records and reports, family ownership arrangements and the current business legal structure.
Intellectual property arrangements
You will need to think about current business contracts; ensuring they were checked by an intellectual property lawyer and that all arrangements were put in writing. It needs to be clear who owns what, because intellectual assets can be a top asset and if ownership is not clear, it will decrease the value of the business.
Once employees know the business is going to be sold, there will be a ripple effect, so consider incentives to keep key people in post. These are the individuals who will ensure the business continues to be a success, so review key employment contracts as these are the people who will help you work towards a successful sale. External change management experts can also support and guide you through this process as well keep you focused, and your staff incentivised as the sale goes through.
Financial records and reports
All financial records need to be ready to be scrutinised by potential buyers, so the next consideration is to ensure they have been reviewed and audited by an external organisation. Remember that even if you have great faith in your accountants, they may be a firm that a buyer has not worked with before.
Family ownership arrangements
It may be that you are selling the business with a view to retiring and you may want to consider passing on some ownership to family members before selling off the company. Again, it is important to discuss the financial benefits in doing this with experts, who have many years of experience in working with private business owners and supporting them through a sales venture.
Legal structure of the business
Ensure there is complete clarity in the business legal structure before going ahead and selling your business. It is important that you are clear whether the current structure under which the company is owned, is the most efficient one for a sale. It may be there are tax benefits if the structure is reviewed and for this, you do need to speak with experts in corporate and commercial law and taxation. Once you have carried out your due diligence, then the next step is to pull the right team together.
Create the right team to develop a sales plan
You are not going to be able to do everything by yourself, so get the right team behind you who can take on and share a number of areas including negotiating on your behalf. Evaluate whether your current accounting and legal team have the expertise to carry through a deal of this size and this is where external highly skilled advisors will be worth their weight in gold.
They will sit down with you and the current team and put in place a manageable and realistic plan in place with a strategy to sell the business and maximise the sales value. It is really important that once you have decided who you are going to work with, that you allow them to get on with the job in hand. Establish clear lines of communication and responsibilities for providing information in advance. Remember, you will still have to juggle the day-to-day responsibilities along with managing a workforce who are bracing themselves for change. This is going to be an emotional period for you as the owner, so make sure you don’t try to take over the sales process when you have experts in to navigate this process for you.
Packaging the business and being honest
You need to have a plan in place before starting to engage with prospective buyers, and it means considering how you will communicate the news to clients and where they will fit in with the new owners. It is very important to be able to understand the value of the company from the buyer’s perspective. Not getting fixated on the sales value is going to be hard to avoid, but this is about thinking who the buyers may be and why your business is attractive to them.
Honesty is the best policy, so if you have an area of operational weakness then acknowledge this and work towards improving it. Being defensive will not help but let the professionals you have brought into the team make realistic assessments about the business. If you cannot remove or reduce a problem before the sale goes through, then acknowledging it before they highlight it, means you are in control of the message that goes to the buyer.
Life after the sale
Don’t forget to give some thought to your personal financial situation after the sale and also the extent to which you are going to sever ties with the company. It may be that you want to accept options, hold a seat on the board or continue as an employee, and all these arrangements need to be in writing. You also should consider a post-sale personal financial plan because having spent a number of years building up a successful business, you have earned the right to enjoy the fruits of your labour.
Fortunately, you don’t have to go through selling a business on your own. There are experts on hand to guide and support you every step of the way.