There can be no doubt that selling your business stands as one of the most complex and important decisions you'll likely ever make. It is often the case that a business represents decades, or even a lifetime, of dedicated work. Let's examine some of the critical steps that you should take when it comes time to sell.
One of the most critical steps that any seller can take is to begin the sales process far in advance of the date that they plan to put the business on the market. Working with an experienced M&A advisor (and doing so preferably years in advance) is one of the single best ways to ensure that you will be ready to sell your business when the time comes. It will also help you to avoid the numerous pitfalls that potentially await.
A good M&A professional can also help identify weaknesses in your business and help you address those issues; however, this is only the beginning. Your broker can help you with everything from strategy and negotiations, maintaining confidentiality, establishing your business's market value, and connecting you with other seasoned professionals, such as accountants and lawyers.
A third key point that all sellers should consider is their psychology. All sellers must remain flexible in their approach to selling their business and stay respectful of prospective buyers. You must put yourself in your buyer's shoes and try to think of what they will need to feel confident in their decision.
Good seller psychology is also essential. Sellers should not attempt to rush or force a sale or overprice their business. In short, you need to keep "your head in the game" and keep your emotions out of the process.
Sellers also need to realize that the statistics strongly indicate that seller financing is likely. Only 75% of sellers ultimately receive their asking price, and businesses listed as "all cash" generally do not sell. Reasonable sales terms will significantly increase the chances of successfully selling a business. Commonly, sellers fail to realize just how much interest they can generate by financing the sale of their business. A reasonable down payment is also another way to improve the odds of selling a business. Willingness to finance makes a clear statement to a prospective buyer that you believe in the company and its ability to generate revenue. From a buyer's perspective, an "all cash" demand can be a red flag.
An open mind and a steady temperament will increase your chances of selling. You may want to sell your business and ultimately move on to new things. But the reality of selling a business is such that "walking away" may not be feasible. Transitioning your business into the hands of a new owner is usually more of an ongoing process. Understanding this and working closely with an M&A advisor in advance of selling your business will help to streamline the sales process and significantly improve your chances of a successful outcome.
