How to get the most value when selling your business
Selling a business is one of the most important financial events an entrepreneur will experience. It can lead to a payout that completely changes the trajectory of their life and that of their family. However, selling a business for top dollar can be difficult in today’s increasingly competitive market. Critical elements such as timing and negotiation skills can be crucial for getting the best value for a company you spent your life building. In this article, I’ll share some tips from my experience as an M&A advisor on how to sell your company at the highest price possible while minimizing stress during what is often an emotional time.
Think like a buyer.
One of the most important things you can do when selling your business is to think like a buyer.
To accomplish this, you need to understand what motivates buyers and what they are looking for in a business. If a buyer is looking for a specific industry or geography, it’s important that you understand those details and how they could affect the price of your business. Meanwhile, if these details really don’t matter as much as other aspects of your company (such as how long it’s been around), then it may be better to focus on those instead.”
Have your records in order.
It’s important to have good records of your business, as this is what you’ll be using to determine the value of your business when it comes time for sale. The kind of records you keep depends on how long you’ve been in business and how much information you want to retain.
While there are no rules about how long to keep these types of records, we recommend keeping them in some kind of filing system so they’re easy to access when needed. Below are some examples:
Financial files: These include your bank statements and profit-and-loss (P&L) reports; invoices; contracts; insurance policies; tax returns and tax schedules; lease agreements or purchase documents for any equipment or real estate used by the company; marketing materials (brochures); employee handbooks/records with signatures from all current employees regarding confidentiality agreements etc.; any other legal documents with regard to the operation of your business – including leases for office space rented from someone else etc.-as well as documentation related specifically toward acquisitions made during its lifetime such as catalogs used when selling products through third party vendors online (Amazon).
Make sure your business is running smoothly.
Before you sell your business, it’s important to make sure that everything is running smoothly and profitably. You also want a good team in place and a good reputation. For example, if you have an excellent website with great branding, customers will be more likely to come back when they need something similar in the future.
You’ll want to make sure that you’re doing everything possible to maximize profits while still maintaining quality of service or products offered by your company.
Consider your options.
When considering selling your business, it’s important to understand the different options. The most straightforward option is to sell directly to an employee or family member. For example, if you’re a small-business owner who wants to retire and have no intention of working in the company again after retirement, you could consider selling your business to a current or former employee.
If this sounds like something that would work for you and your situation, here are some things to keep in mind:
Your goal should be maximizing value for yourself (not necessarily getting the highest possible price), so make sure that any deal structure does not include restrictive terms or clauses that could harm the future growth or profitability of the company.
Consider what kind of experience each potential buyer has with running businesses like yours—do they have experience managing employees? If so, how many? Do they know how long it takes from start-up until profits first appear? How about industry trends affecting their industry niche—are they aware of these trends and how they might affect how quickly sales will grow over time?
Hire a good M&A advisor.
You should hire a good M&A advisor, who will be the person to guide you through the entire process. They can help you find buyers for your business and negotiate on your behalf. As such, it is important that you choose an advisor who has experience in selling businesses like yours.
There are many things to consider when choosing an M&A advisor. The most important thing to look at is their track record: how many transactions have they completed successfully? Have they been involved with similar transactions before? What do past clients say about them? Are there any negative reviews that would make us wary of working with them? All these questions will help you pick out the best candidate for selling your business.
What questions should we ask our potential advisors when we’re interviewing them? We recommend asking 3 main things:
What kind of service do they provide (i.e., what support will I get)?
How much does it cost (and what are all the expenses)? * What is their commission (if any)?
How long does it take from start to finish
The earlier you start the process of preparing to sell a business, the more likely it will sell for a good price
The earlier you start the process of preparing to sell a business, the more likely it will sell for a good price.
The longer you wait, the more likely it will end up costing you to lower your asking price or deal with more competition.
We hope that our suggestions for preparing your business to sell have been helpful. Fulcrum Develop is ready to help you navigate this important decision. Contact us today to have a confidential, no-obligation consultation.