Keys for Selling A Business
Through the years, we have learned many keys for selling a business. The following are a few important ones.
- Respect the process for selling a business. Our process works. We are systematic, and provide an approach to deliver the best possible sale. Our process is comprised of steps, tools, strategy, and protection to business viability, all to bring forward the best buyer. Then we close under top terms and conditions.
- Build transferable value in the business you hope to sell.Accounting books that are current, reliable, and follow accepted accounting practices is the first step. Take proactive steps to have a saleable business in operational, financial, organizational, and other areas. There is a huge gap between owning a really good company, and owning a really good company that someone wants to buy. Owners often fail to recognize and manage this reality.
- Understand market dynamics of price-value-terms.Business owners, who do not have experienced guidance in this critical area, will often face disappointments when selling a business. A buyer’s value resides in the future of the business. This is an area where size matters; larger businesses command larger valuation ratios. Appraised value very often has little relationship to transactions in the market. The “Grapevine” is usually fiction based loosely on facts. Understanding the marketplace demands an experienced guide.
- Set realistic expectations.An owner who is selling a business can dictate all terms under which they will sell. A buyer can likewise dictate all terms. Add to this the banker’s limits to what can be done, and key advisors adding-in their do’s and don’ts. Laws and the IRS will also create limits. We help reasonable deals get done. Rigid and excessive ones have little to no chance. There must be incentive for a buyer to satisfy the seller’s expectations.
- Prepare to effectively enter the market.Preparation enhances ultimate value. Gathering financial, organizational, and operating information, and making sense of it from a buyer’s perspective, is a key job for intermediaries. Emphasize the positive, but don’t hide the dirt. Strive for accuracy. Provide solutions and opportunities. Business buyers quickly lose interest when the information they get does not make sense or is too convoluted to build confidence.
- Recast correctly. Recasting of financials is standard procedure in markets for selling businesses. Unfortunately, people who do not routinely handle business sales often do not know how to recast correctly. Inappropriate recasting cannot only wreck a sale, but it can create an area for litigation after the sale. If recasting is to be done, make sure it is done correctly!
- SHHHHHH! Putting information about your company or your desire to sell your business into the wrong hands can be damaging to the business and the ability to sell it. Let Bluestem put up an effective screen from direct contact with prospective buyers. Use a strongly worded NDA, but that is not all. Bluestem provides a process to manage buyer prospects while maintaining confidentiality. We are prepared in case word gets out; and we are proactive and have a failsafe plan.
- Allow for transition and training.Seldom will a buyer pay full value if the selling business owner plans to hand the buyer the keys and say adios at the closing. It is customary for significant training to be implied in the selling price of the business. This is always a negotiated item, but if it is inadequate, the ability to sell, the price, or other terms will suffer.
- Expect a thorough due diligence.Buyers will rely largely on what they are told about a business up to the point of making an offer. But when the terms of the deal are agreed upon, it is customary, usual, and appropriate for the seller to open its business to scrutiny for inspection by the buyer and the buyer’s team. The buyer is making a sizeable investment, and demands and deserves to have a real understanding before putting money on the line.
- Employ a skilled guide.Owners preparing to sell a business come out money ahead by having an expert manage the process. Many critical factors impact the success of the business selling process. At Bluestem, we know the steps, how to execute them to maximum advantage, and where and how to tap the market for the best buyers. Having the correct points of access to the market, tools, and procedures adds values. Enabling the business owner in transition to remain focused on running the business, to keep it in top shape, is an expert guide’s major responsibility. Bluestem’s professionals enhance process and tools through wisdom, art, and vision that come only through many years or commitment in selling businesses, and from heavily vesting themselves in professional excellence.
We are your expert! We are prepared to guide you to success in selling your business.
Comments . . .
Tom West is a pioneer in the sale of businesses as an agent. He says “left on their own a business seller and buyer often destroy the very business sale they set about to accomplish”. Scores of articles are written about selling a business, such as how to sell a business, preparing your business to sell, and tips for selling your business. Others probably include guerrilla strategies to sell a business, strategies for a successful business sale, selling your business for fun and profit, or the like. Despite the good and proper content to be found in these or self-help websites, there’s simply no substituting for deep, diverse, direct first-hand experience in selling small or midsize businesses. The sale of business activity involves managing simultaneous interrelated impacts, and “negotiations” between cooperating and competing, interdependent, and dependent principals, and ancillary parties.
The Professional M&A Process works. It is a systematic and provide an approach to deliver the best possible sale. The process is comprised of steps, tools, strategy, and protection to business viability, all to bring forward the best buyer. Then close under top terms and conditions.