Selling your business is a complex process that requires a lot from you and your team. But if you want to get the best possible deal, you will need to take steps to prepare your company for a sale. In doing so, you can improve the value of your business and take action to secure the highest price you can. Below are the 7 steps you need to complete if you want to successfully sell your business and walk away on top.
Step 1: Prepare to Exit
Waiting for an unexpected factor to force your hand into selling will put you at an extreme disadvantage when it comes to pricing. Illness, lack of a succession plan, or the arrival of a competitive threat could all impact your ability to sell at the price you deserve. So plan your exit strategy way before you think you need to. Having all of the following items addressed will help you be prepared for anything.
Step 2: Determine the Value
There are a variety of methods you can use to calculate the current value of your business. Each has its own advantages and challenges, with more accurate models becoming increasingly more complex to calculate on your own. This is why using a qualified valuation professional may be your best option if you are seriously considering selling your company. Such individuals will be able to provide you with the most accurate baseline possible.
Step 3: Clean Up Financials
Keeping up with the hygiene of your financial records with so many other demands on your time can seem next to impossible. But as you approach a potential sale, cleaning up your financials can help to drastically improve the outcome as any possible buyer will want full transparency during their due diligence process. As an owner, you can avoid many red flags by working with an accountant to clean up your financial statements and business tax returns for at least the past three years.
Step 4: Boost Your Sales
Buyers are most interested in successful businesses, not struggling ones. So if your sales are declining, it is not the time to sell your company. And if a single customer accounts for 20% or more of your revenue, you will want to diversify your customer base prior to a sale as that kind of dependence will make a buyer nervous. Try to boost your sales with increased marketing and promotions so you can present buyers with a better, more valuable reason to make the purchase.
Step 5: Find a Broker
Selling a business is complex so enlisting the help of a broker can help you get the best offer. Depending on the size of your business, a broker will typically charge a commission of 10% or more. But for this, they will handle the valuation of your company, prepare a prospectus on your business, tap into a large network to locate buyers and list with suitable marketplaces, and may even help guide buyers to financing resources.
Step 6: Prequalify All Buyers
One of the most common reasons the sale of a company falls through is because buyers are unable to secure the appropriate funding for the purchase. Prequalifying your buyers helps to eliminate some of this risk. Due diligence is not just for the buyer, and as a seller, you should complete your own evaluation of the individual or company making the purchase. Some banks will even require the seller to provide a portion of financing for the transaction to help ensure your continued interest in the success of the business.
Step 7: Finalize the Contracts
As you can imagine, there are a number of legal considerations and documents that are required to finalize the sale of a company. Among the most critical to close the deal is the asset purchase agreement, the contract for the sale, and the purchase agreement for all business assets, including both physical and intellectual property. All this paperwork will need to be reviewed carefully as they usually consist of non-compete agreements, asset listings, and may even stipulate what you, as the prior owner, can do next and when.
Hatteras Group Can Help
The Hatteras Group is a collaborative team of professional intermediaries and advisors that guide business owners and entrepreneurs as they navigate the complex process of mergers or acquisitions across a variety of industries. Generally, we work with those companies whose annual revenues are $5MM to $100MM.
If you are trying to sell your business, we can help you determine the value and audit the health of your company with an advanced 10-point evaluation checklist to evaluate if there are any issues that could potentially derail a sale. Our team can also provide advice on how to address any concerns that we find. Contact us today for more information.