Does it surprise you that 50% of business owners will try to sell their business themselves, perhaps to safeguard the work they have poured blood, sweat and tears into? By devoting adequate time to the sales process and communicating clear objectives from the get-go, you can ensure they strike upon a deal that ticks the right boxes and is a worthy culmination of your hard graft. If you are thinking of selling your business be sure to read below.
1. The devil’s in the details
A successful exit strategy should start with taking a long, hard look at the business in its current state. Allocating time and resource to the audit process is key, as sellers must put themselves in the buyer’s shoes: shining a light into all corners of their business, and anticipating potential stumbling blocks.
Owners may occupy one of two extremes, either viewing their business through the rose-tinted spectacles of a proud ‘parent’ or applying the hyper-critical gaze of someone who has made a success of identifying and ironing out the cracks. In light of this, bringing in external expertise, be it legal, financial, or strategic, can pay dividends, providing a crucial objective eye.
A review that is one step removed from day-to-day operations can give an honest overview of the business. Highlighting those areas that are working well and which will be key to a sales process as well as pointing out those which may need to be addressed before a buyer starts to look at the business closely. From GDPR compliance strategy to customer contracts on the cusp of being signed, a third party can help provide a balanced view of what is, and, as importantly, what will not be of interest to a buyer.
This also involves total honesty about any weak points. Rather than papering over cracks, owner-managers will want to showcase their business in its best possible state – the equivalent of baking fresh bread before people come to view a house that is for sale – whilst maintaining a perspective of will be important for a buyer: businesses are living, breathing machines, and no-one expects them to be faultless!
2. Communication is key
At this point, it is important to carefully choose who to keep the loop. A balance between discretion and honesty can be struck by defining a core team to inform, choosing the management level roles where business decisions can be communicated without taking the risk of distracting delivery teams.
When a potential buyer is identified, careful consideration should also be placed on when and how to introduce them to customers and suppliers. Naturally, a seller will want to safeguard these relationships until the final stages of any deal, while prospective new owners will be chomping at the bit to initiate and build these connections. As with informing staff, it’s best to reach a compromise between openness and keeping cards close to your chest – not holding off until sale completion but being unafraid to push back on hasty meetings.
3. What’s next?
With contracts in discussion and the buyer beginning to make plans for your business, the question remains – what’s next for you as the previous owner? Again, there’s no need to assume that a deal means all or nothing, with an increasingly attractive prospect being a tapered involvement. It often suits both buyer and seller for the owner to remain in situ for a period, perhaps full time for the first few months, before scaling back – especially if the acquirer is a financial institution rather than a “boots-on-the-ground” business owner. Deciding and conveying your preferences before entering the sales process leads to a better end result, meaning this should be key to negotiations early on if it is important to you.
It may be that during this process of pre-sale soul searching, an ideal owner presents itself. Often this takes the form of a second-tier manager involved in the day to day operations, who has the expertise, authority and company culture nailed, but may not have the means to buy. Again, compromises can be reached, with private equity funding, bank debts, lending the money yourself as the business owner, or a combination of all three, allowing sellers to have their cake and eat it – securing the finances at the same time as opening up an opportunity for someone with potential and a strong understanding of the business to take the helm.
In the face of any potential pitfalls owner-managers face when selling their business, it’s preparedness and a willingness to meet parties halfway that will pave the way for success. Coming to the process with firm goals, there’s no reason that owners can’t land on their ideal outcome – from succession and maintaining standards, to price and personal involvement.
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