If you’re ready to sell your business, you may be eager to move on. Before you do, you need to consider many variables. Advanced preparation is key. Asking yourself the following questions can ensure you’re ready to take this important step.
- What might a buyer find when they go digging? If you’re planning to sell, you probably already have brand recommendation, demonstrable profits, and a good reputation. But are there areas for improvement, such as problems a buyer might identify once they place your business under a microscope?
- How much is my business worth? It’s nearly impossible for owners to be objective about the value of their business. This is why a professional valuation can be so useful. It points to areas of improvement and can help you objectively assess value. The buyer gains the reassurance that comes from knowing that your value is based on specific, measurable criteria—not wishful thinking.
- What does your future look like? You need a plan for your future, or else you’ll have little incentive to see the sale through to completion. More specifically, you need a financial plan that takes into account the best and worst case scenarios.
- What will happen to your team? If you’re like many owners, your employees are family. Will the new owner treat them that way? What do you plan to do to encourage them to stay with the company post-merger?
- How will multiple owners affect the sale? Sole proprietors don’t have to worry about other owners. But if you’re in a partnership, you need to consult with a legal and financial team to weigh how a sale will affect everyone’s future—particularly if only one owner is divesting.
- What should the offering memorandum contain? A skilled M&A advisor can help you review the initial offer from the buyer. But they should also help you draft a listing that captures key data about your company while depicting your business in the best possible light.
- How will I protect confidentiality? If details of a sale leak out too early, catastrophe can strike. Employees may jump ship. Competitors may take advantage of the sale, or even pretend to be interested in a purchase just to get access to proprietary data. An airtight confidentiality agreement should have real teeth in the form of a penalty for breaking confidentiality. Seek legal advice to draft this important document.
- What factors other than purchase price matter? Various purchase terms can affect total value, including the amount you get at closing. They may also affect how you spend the coming years. For example, a sale with an earnout provision may mean you have to work very hard to get full price—and in some cases, the earnout benchmarks are simply unreasonable. An experienced advisor can help you look to factors other than price that affect total sale value.
- Do I have evidence to substantiate my claims? Great forecasts are fun, but they’re meaningless if you can’t substantiate them. Ensure you can prove your projections, and that your books contain hard, specific, empirical data. The right advisor can help you get your books in order and help with forecasting methodologies.
