10 Tips When Selling Your Business (Part 1)
1. Get in order with your home.
Your company runs very well and, just the way it is, is successful. You recognize that there are areas where the procedure or main contracts are not as straightforward as they should be, but without significant hitches, the job is finished. Consider, though, how a cautious buyer or new key investor would look at your business. When they put the balance sheet under a microscope, what are they going to find? During negotiations, a thorough analysis of key business processes, properties and contracts will save you considerable trouble and dramatically increase the value of your business.
Sometimes, these areas require the most attention:
Job contracts: If they find out the organization is changing owners, can the key executives stick around? What will prevent them from leaving, or from competing with, the company? Would they have the drive to hang around and help the company prosper after the sale? To ensure that the best workers can work for a profitable sale, review key employment contracts.
Financial documents and reports: Ready for due diligence are your financial statements? Do the new GAAP accounting methods reflect them? Have they been checked by a reputable CPA company or audited? You may be prepared to place great faith in your relationship with your accountants, but how happy is the customer going to be with their job?
Intellectual property arrangements: Have you made an intellectual property lawyer check your company contracts? Are all the agreements in written form? Is it obvious in those arrangements who owns what? Ambiguity of ownership also makes for bumpy discussions with a buyer or investor. The most significant asset group on the balance sheet is also intellectual properties. The value of the corporation may be reduced when ownership is not apparent.
Company legal framework: is the most effective structure for a transaction the actual legal structure under which the business is owned? Are you going to pay more tax than is required? Before the sale, cleaning up the structure will simplify the agreement and eliminate issues when the company is sold.
Arrangements for family ownership: Have you considered passing any ownership to your heirs before selling the business? This approach also provides attractive outcomes in financial and estate planning.
2. Separate company lines of various kinds.
Trying to assess a multi-aspect sell my business privately organization as a whole often results in marketability and value distortion. This means that the company may not be as desirable as it should be, and it may be difficult to value potential customers.
While you can think of the organization with various divisions as an integrated whole, the customer may only be involved and may only understand one part or division of the overall business enterprise. Buyers sometimes understand how purchasing a target company's main assets can build a valuable competitive advantage. Yet they see other properties at the same time as something of a liability. Buyers will get a better view of the competitive value of purchasing their company when the assets are split into natural business divisions (or a least some portion of it). As a consequence, the customer will be able to pay more.
Separating the business can also make it easier to maintain a portion of the company. Maybe you see an undeveloped market opportunity for a portion of the company, or maybe you just want to maintain enough to provide a predictable cash flow to you and your heirs. If the buyer is not interested in the entire company, both parties may profit from separating those assets before the sale.
3. Bring the right people together and let them build a strategy.
In order to minimize fees, company owners often avoid getting advice from outside advisors. Experience demonstrates, however, that by hiring good advisors, company owners experience far higher net profits and much more peace of mind. After completing complicated negotiations, while negotiating on their own behalf, many business owners realize that they are their worst. Recognize that upfront, and take advantage of the advantages of serving your interests with highly qualified advisors.
Carefully consider whether your current accountants and legal advisors have the expertise to advise you on a transaction of this nature before going forward. If they have been representing the business for a while, their comprehension of the company's past records and activities will play an important role in bringing together a contract. It is smart to broaden the team of specialists if they lack experience with major buy/sell transactions.
Before you meet potential customers, make sure the team has a good strategy in place. Getting ahead of yourself can lead to missteps in negotiations, delays and a less favorable result overall.
Let them do their work once you have your team in place. The error of taking over the sale process is made by certain business owners. Strong advisors are recruited, but then get in the way. It is a big deal to sell a company. Letting go is emotionally difficult. Maximizing the selling price for your business, however, requires precisely that. All the difference in the result can be rendered by the willingness to be impartial and detached. A good team of advisors will listen to you, counsel you about your choices, help you build a sound plan, and argue persuasively in the negotiating process for your interests.
4. From a buyer's perspective, understand the value of your brand.
For a company owner, it is very common to fixate on a purchase price from start to finish. Although it might sound counterintuitive, money is always left on the table by such sellers. Asking yourself who the possible customers are and why they want your company is much more important. You will get more for your company by evaluating how a prospective buyer plans to deploy your company as a strategic asset before you bargain.
5. Understanding vulnerabilities completely.
Both companies are faced with organizational weakness. Nevertheless, we all look at our sell my business online organizations like new parents look at their kids. Being protective and even defensive is simple, and it can be hard to be sufficiently critical. It will help prepare the team for a profitable sale by enabling yourself and your advisors to make rational decisions. Make sure the organizational vulnerability is acknowledged by you. Find those that are not yet found or recognized, in addition to the ones that are known. Likewise, be completely cognizant of contingent liabilities. If it is not practical before the transaction to completely eliminate the problem, recognizing and owning the issue before the buyer discovers it allows you to formulate a plan for how best to disclose and control the message to the buyer and cover your interests when the purchase-sell contract is drawn up.