So, let’s look at the steps involved in the process, consider the prospective buyer’s perspective, and focus on how to manage things to your best advantage.
1. Focus on your financials
Your financial records should be up to date and provide concrete proof your business is in the best possible condition. And if this information can also track the development of your enterprise over a lengthy period of time, it will be much easier to convince your buyers they are buying into a stable business which has always been consistently and productively managed.
In fact, the more your records can show about your business finance – for instance, tax returns and comprehensive records of development loans etc. – the more persuasive they will be in convincing the market to invest in a thriving business at the price you want.
Be sure not to let things slide as you approach the sale and don’t stop keeping careful and thorough records. You should also make sure that you have settled any outstanding lawsuits and paid up your tax in full.
2. Get a professional valuation
When it comes to valuing your business, the figures you put forward will be subject to detailed scrutiny from buyer-side due diligence teams. So, if you want to be sure of a good deal at sale time, you must make every effort to present a comprehensive professional valuation which entirely supports your claims.
Furthermore, if you do this in good time, you will have the chance to identify any weak areas and do whatever is necessary to improve the picture.
It could be, for example, that the expertise your business has developed over the years is slightly let down by a token acceptance of modern technology – for example, a weak website which is little more than an electronic business card. If such issues are then addressed early, it can make all the difference in terms of buyer interest and getting the price you hope to achieve.
You also need to be very clear about what it is that you are selling. Will there be physical assets involved, client lists or trademarks? Whatever it is that you determine as being part of the sale of the business will play a role in its valuation.
Having your business professionally evaluated will save you trouble later when negotiating with potential buyers.
3. Maximize your sales
When a business owner thinks of selling, there is sometimes a tendency to slack off once that decision is made. But if you consider the buyer’s point of view, no one wants to buy a business which seems to have peaked and is now on the way down.
So, once you’re ready to list your company, try to push your sales that little bit more. Not only will that reflect positively in your business projections, it will also leave you current and well-versed to answer questions about new business prospects. That in turn will make it much easier to convey the impression you are offering a go-ahead business with plenty more profit potential.
4. Use a good business broker
Unless it’s a family sale or a management buyout, closing a sale at a good price is usually a matter of marketing the business to the right people. Yes, it’s true you can get interested outsiders with plenty of cash, but that’s the exception not the rule. Mostly you’ll be selling to someone who knows all about your sector and what a good company really looks like.
However, such buyers are not always easy to find. That’s why a good business broker who has plenty of experience of your industry, as well as a good list of contacts and a healthy track record of successful sales, will be a great asset in finding interested buyers who will be more likely to make a serious offer.
5. Pre-qualify your buyers
This is another area where your business broker and other professionals can make a great deal of difference. You can negotiate with much more confidence once you know your prospective buyer can be trusted 100% and has the finance in place to go ahead on any offer they make. Such confidence can help to drive the deal forward and move on to negotiate the outcome you’re looking for.
It can be extremely important to know whether or not a buyer is serious before you give away valuable information to competition or the like. Even if there is nothing as nefarious as this underway, you don’t want to waste your time on someone who has no real intention or capability to buy your business.
In order to determine that a buyer is serious, you can ask them some questions about the time frame that are looking at for the purchase, the size of business they’re interested in and their previous experience. Then, of course, ask how they are going to finance the purchase of the business.
Any serious buyer will have put some serious thought into these questions and be able to give you their answers in some detail.
6. Ensure the contractual details are in place
As you move towards the final phase of a deal you have the sale contract and a host of other legal documents to sign and/or exchange. This is where your legal experts really come into play. Timely and accurate presentation of legal documents not only demonstrates your professional attitude, it also perpetuates that trustful relationship which is the core requirement you need to finally conclude negotiations and get your deal over the line.
By Bruce Hakutizwi, Director of North America for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses.