Selling Your Business
It is a Committed Process - Be Prepared
There are very few events in the life of a business owner that are as defining as the moment he or she puts their business for sale. Yet, it is a general consensus among business advisors, brokers and lawyers, that majority of times this hugely important step has not been well thought through and prepared for.
There are various reasons sellers are not able to fully maximize the value of a business transaction, however, in majority of cases, sellers have a hard time:
- Finding suitable and qualified buyers
- Getting an accurate valuation of their business
- Receiving unbiased and objective advice (business, legal, tax)
- Getting sufficient market knowledge (small business transactions data is not public knowledge)
- Constructively negotiating deal terms
- Educating buyers on the acquisition process (in the case of first-time buyers)
Business Selling Process
There are a few defining steps sellers need to take in preparing the business and ultimately executing the transaction:
- Plan and Prepare:
- Financials
- Equipment
- Inventory
- Complete Company Valuation
- Third-party
- Determine asking price
- Create a Business/Marketing Profile
- Market the Business
- Confidentiality
- Identify and short-list Buyers
- Term Sheet
- Obtain offers
- Prepare for due diligence
- Negotiations
- Due Diligence
- Open Escrow:
- Draft closing documents
- Closing:
- Employee announcement
- Transition management
These are just the broad strokes of a business sale process. Whether a $500,000 or $15M the value of the business, the successful business sale process does not deviate much from the above outline. According to the International Business Brokers Association, the average time it takes to sell a business is between 9 and 12 months – and the majority of this time is devoted to negotiations and due diligence, as opposed to – as the common misconception among sellers is – finding buyers.
Read thoroughly the "Five Steps of Selling" and make sure you do your homework properly prior to taking your business to the market place. And when you do - be ready to listen to what the market tells you and adjust accordingly.
