Whether you’re planning an exit now or assessing options for the future, you’ve already accomplished something most people never will. Selling your company is probably something you’ll do just once, so take time to prepare for the sale so you can get the most out of the process. These seven steps can help prepare your business for a successful sale.
Prepare Before You Hope to Sell
It’s not always possible to prepare as far in advance as is ideal, but you need to know that rapid sales usually yield lower sale prices. Advanced planning—ideally a few years ahead of time—helps you optimally position your business, making it more attractive. Take time to tackle the small details which make your business more marketable. Although some acquisitions seem to come out of nowhere, most buyers want a detailed due diligence process. That can take months.
Clean Up Now
Buyers are risk-averse. No one wants to purchase a company that’s not really ready for a sale. If your books are not in order or your systems are dated, this reduces value. Document all policies and procedures so that the buyer can hit the ground running on day one. Work with skilled lawyers and accountants to get your business ready. Build a strong team and track key metrics. The business must be able to run without you. Make yourself unnecessary and watch the sale price rise.
Lock Back at Least Two Years
How has your business changed over the last two years? What trends have you observed? And most importantly, are you getting more customers and seeing more sales, or are things declining? Your buyer wants to continue making money from day one, so make sure your business is growing.
Know What a Buyer Wants
Buyers want reliable, profitable companies. Don’t try to sell when your business is in decline. Instead, hone your focus, build a niche, and work on creating something that can attract the right type of buyer.
Understand What You’re Selling
What is most valuable about your company? Is it your customers? Your products? Your recurring revenue streams? Your brand? Every business is different. You must identify early what it is that’s most important. Focus on this source of value, and do everything you can to increase its value and highlight its attractiveness.
Know the Importance of Strategic Fit
Knowing what your company is best at can help you determine what a buyer might offer to drive value oven higher. Consider also the role of culture, since a laid back environment may be a difficult fit for a conservative corporate culture. Your buyer needs a vision that is similar and complementary to the one you’ve already built. Poor fit is a leading cause of merger failures, so you must know your company—and your buyer.
Plan Ahead for Due Diligence
Don’t think for a second you can hide your dirty laundry. It will come out during due diligence. Take a hard look at your culture, protocols, personnel, and processes. If you get things under control now, you won’t have to worry about negative information coming to light. If you don’t, there may be a downgrade in value at due diligence. As you’re cleaning up your books and processes, ensure also that information about these key aspects of your business is readily available. Otherwise due diligence can end up taking much longer than you anticipate.