Before discussing what and how to sell your business for its highest value. First, you need to make sure that you are ready to sell your business and clearly identify your reasons for it.
· More capital equity needed to meet potential expansion. Facing difficulties in meeting business’s rapid growth.
· Retirement: You would like to step down and have deserved rest.
· Mature industry: Sell the business before the company declines further in value.
· No clear successor: Rather than investing the time and effort to groom a successor, you may decide to sell the business.
· Partnership disputes: Growing a business is challenging and disputes can occur between owners. Rather than continue to operate the business under difficult circumstances, business partners may decide to get a business divorce.
· Boredom: Finally, you decided to move on to a new challenge or interest.
Are you sure you want to sell your business?! If the answer is affirmative Yes, then let’s go through the 7 foundational steps to help you navigate the sale process and make the most of your time and get the best value for the years of your hard work.
Step 1: What is your business worth?
It is highly recommended to use a valuation firm to determine the true value of your company, because evaluating the business requires a highly skilled expertise. The assessment will include everything from inventories to sales, debts and other business assets to identify opportunities and set a realistic price. Using a third-party firm for valuation will bring credibility to the asking price.
Step 2: Shape Your Company’s Financials
Buyers are looking to buy businesses that will not only be profitable but also are sustainably growing. Savvy buyers will consider everything from equipment to real estate and business accrual-based financials; it’s a must to get these in order with a professional firm before taking your company to market.
Step 3: Make your business appealing to potential buyers
Buyers are generally looking for businesses that are growing and flourishing with sales, long customers list, talented management team, innovative and lean processes, digitized and automated operations. So, you may need to fill the gaps to make your company look attractive.
Step 4: Screening you buyers
Who is the buyer you are looking for? It’s advisable to create a buyer profile, stating the criteria to be a qualified buyer. Using a buyer’s qualifications criteria will not only save you time and effort in negotiating with unqualified or unserious buyers but will also reduce the possible leak of information about the business.
Step 5: Protect your business during Due Diligence
There are generally three aspects of due diligence: legal, financial, and commercial. You as a seller need to focus on all three of them to gain a negotiation power over the buyer.
Before you even start the due diligence step, it’s highly advisable to ask the potential buyer to sign a non-disclosure agreement to protect your business sensitive information and know-how.
Step 6: Negotiations
Negotiation skills is highly required in this step. You need to define the metrics on which the selling price of the business is evaluated on. Negotiations can be nerve racking and stressful during this sensitive step especially on you. After putting your lifetime hard work, sleepless nights, and resources into your own business. The selling process may become very personal matter to you. And especially during negotiations the buyer might criticize some of your current business practices or ask detailed questions that might make you uncomfortable.
Step 7: Closing
Finally, closing on your business sale deal. It’s important to understand what the agreement includes, and what happens as the business is transferred to the new owner.
At closing, you may sign documents related to the sale of specific assets, and your agreement may require you to sign a non-compete agreement, which will be in place for an agreed-upon period. Another document is the contract for the sale.
Selling your business may be the culmination of years of hard work and effort, and selling may be the most important financial decision you will ever make. Put a team of people together, do your homework, and maximize the value of your business.
How can Bowarr Management bring value in the process of selling your business:
- Business valuation
- Due diligence
- Industry research
- Help you boost the value of your business
- Prepare unbeatable pitch to ensure a successful close
- Vet potential buyers and ensure the confidentiality of the process
One of the hardest parts of the selling process is conducting due diligence. That’s where most deals fall through. Over 50% of deals fall apart during the due diligence process. Bowarr Management will keep you on track and guide through the entire process so you can focus on running your business.