The process of selling a business normally starts with you: no, not the business, you! Your ambitions, your plans, your aims and your future are the most important drivers of the process.
Mistakes can happen even before you start the actual process. Consider carefully these five critical issues that crop up almost every time we discuss a possible sale with a business owner.
1. Are you ready for short-term pain?
Selling your business is not a short and simple process. It is a long-term commitment to a goal you have set your heart on. At times, it may feel like open-heart surgery as both your business and your personal integrity are subjected to intense scrutiny.
One thing is sure, it is not going to be smooth sailing; you will need to have ‘intestinal fortitude’ as one solicitor eloquently put it.
2. Are you prepared for life afterwards?
Even if you choose to remain within the business initially, you aren’t likely to stay more than a year or two, just long enough to give the new owners time to put their plans in place.
Most owners seek a clean break as early as possible, but few devote much time to thinking about what they will do next. Yet, the earlier you start thinking about life after the sale, the more you can be ready for it.
3. Is your business saleable?
There is nothing more tragic after a gruelling and expensive sales process than an unsold business.
Yet buyers aren’t concerned about your situation. They focus on the viability of the opportunity from their standpoint and will walk away without a qualm if the numbers don’t stack up. Here are some common ‘black flags’ for potential buyers:
- A company that is too reliant on the owner: if the buyer thinks that your business is too dependent on you, this may scupper the deal
- A company where the real costs are hidden: if your business has a ‘special relationship’ with other companies, e.g. where there is joint ownership, or if you pay salaries below the market rate, the true operational costs are understated and therefore profits are artificially inflated
- A company that is on the slide: your business may seem healthy but if it is in a shrinking market or has an ageing product range then this will put many buyers off
- A company with no long-term income guarantees: turnover, growth and profit are the first indicators for any buyer, but if your income is unpredictable, or too reliant on just a few clients, the price a buyer is willing to pay will be affected
If you face some of these problems, don’t be discouraged. We can put you in touch with experts who can help prepare you for sale.
4. Have you considered the impact on your staff?
Few entrepreneurs develop successful businesses entirely on their own; your management team and staff are key elements that buyers may find attractive. Yet you should be very cautious about sharing any details of a possible sale with any staff during the process as this can destabilise the operation of the business.
However, when it comes to the sale, we know that most business owners are as concerned about the future for their staff as for the business itself. Make sure you leave a legacy you can be proud of and ensure that all your people are well catered for.
5. Do you have the capacity to ‘double the effort’?
Managing the sale process will be very time consuming, even if you get help with it. Yet the biggest mistake you can make is to neglect what made your business successful in the first place – your attention and direction.
If you can show more growth and profit, your business’s value will increase, but if you allow yourself to get distracted and, as a result, your business suffers, you won’t achieve the sale price you hoped for.
As the famous Spanish novelist Miguel de Cervantes said:
“To be prepared is half the victory”
We established Firm Gains to help you to prepare as well as you possibly can for the challenges ahead. We hope that our advice will guide you along every step of the way. If you can’t find the advice on our website, why not call us instead?