Exitwise

Are You Prepared to Sell Your Business?

For many founders, selling their business is far more complicated than just putting a “For Sale” sign in the window. It can take months or years to properly prepare, and unfortunately, many business owners miss the opportunity to generate a more favorable sale simply because they didn't know all the steps they should have taken prior to entering a full process.

So, before getting too far down the sales process, it's best to spend time preparing yourself and the business for some of the more commonly overlooked aspects of a transaction.

Understand the financials of your business:

Organize and verify the previous 3 to 5 years of financial information related to your business. Keeping strong and clear financial records is important because interested buyers are going to require a deep understanding of cash flows and your business's profitability characteristics.

Key considerations: What is the story you are conveying with your financials? Do you have monthly subscription revenue or long-term contracts? Do you have a track record of sustained growth or are you experiencing sales stagnation? Do you have too much customer concentration, or are you successfully selling into a variety of similarly sized clients or industries?

Educate yourself on the value of your business:

Leverage your financials to define a clear market value of your business. Reach out to financial and business professionals to effectively examine the worth of your business. Obtain multiple opinions to have a more conclusive scope of your business’s value and understand any cost or revenue drivers that influence your company's value.

Key considerations: Read Exitwise's 4 Ways To Calculate The Value Your Business for a deeper understanding of this process.

Define your exit plan:

It's important to have an exit plan prior to any sales discussions. Buyers will want to understand your interest and ability to stay with the business, and your reasons for wanting to sell.

Key considerations: How long are you willing to stay with the business post-transaction? Do you have a strong management team able to support the business after your departure?

How are you going to feel about walking away:

After so many years of building a business, many owners are surprised by the emotions associated with walking away - preparing yourself for the "day after" the sale is something that can't be overlooked.

Key considerations: How are you going to spend your time? What is going to bring you daily fulfillment once you're no longer associated with your business?

Professional Support and M&A Expertise:

Beyond identifying valued teammates within your organization, begin to build out your team of M&A experts, attorneys, and tax accountants. Reach out to professionals that are highly specialized, have a long track record of success, and a demonstrated history of creating competition in a sales cycle. Do your homework, and don't be afraid to ask for referrals and compare notes with other founders and CEOs in your network that have been through a sales transaction before.

Key considerations: Read Exitwise's Who Should You Hire to Help Sell Your Company to better understand your options around who to lean on for support throughout the sales process.

Frequently Asked Questions

What is a succession plan and do I need one as a business owner?

A business succession plan is a framework that enables business owners to properly transition management responsibilities before, during, and after a sales transaction. Succession plans are often overlooked but are important to a sales transaction because they increase buyer confidence in the seller's ongoing leadership team. Creating and implementing a proper succession plan can be a time-consuming process but can often be the difference between a successful sale and a disappointing failure.

What should I do if I don't have a network of M&A experts, lawyers, or banking professionals to help me?

Industry-specific investment bankers and transaction experts help founders develop a stronger understanding of their market potential, and confidently define the opportunities available during a sales process. The Exitwise platform was created to help founders identify the right team of investment bankers, M&A advisors and experts to drive maximum value during a sale. But more importantly, they will stay with you to help you through the exit process every step of the way.

Set up a time to chat with us and we’ll gladly walk you through the process.

Author
Todd Sullivan

Todd graduated from Yale University where he was a 2-time MVP of Yale’s ice hockey team. After a year as a minor league hockey player in the San Jose Sharks and Toronto Maple Leafs organizations, Todd returned to school for his MBA at the University of Michigan where he graduated as Entrepreneur of the Year. Todd went on to build and sell four companies over the next 25 years with offices in Boston, San Francisco, Chicago, New York and Detroit. After the sale of his last business in 2015, Todd has dedicated his time to educating his fellow founders about the M&A process and helping many of them maximize the sale of their businesses.

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