According to Harvard Business Review, the failure rate for mergers and acquisitions is 70%-90%. Poor planning across all M&A stages remains one of the leading causes of these abysmal results.
Before you start preparing to sell your business, you'll want to be among the 10%-30% of owners who successfully close a deal.
But how do you prepare yourself and the business for an upcoming transaction? Is it even the right time to sell? Read on to learn more, including strategies for overcoming common challenges during the preparation stage.
Here's a quick checklist of the various aspects to fulfill when preparing a business for sale, which we'll discuss further in one of the next sections:
Fulfilling all these considerations on your own can be overwhelming. The business sale experts you hire can help you complete every task efficiently.
Our services at Exitwise include helping you find the best experts to help you optimize your exit strategy. We'll connect you with top M&A attorneys, investment bankers, wealth advisors, and financial accountants.
Besides showing you how to prepare your business for sale, these experts can help you sell it under the most favorable terms, including your dream sale price.
Consult with us at Exitwise to find the best M&A experts to optimize your business exit.
There's no rule of thumb regarding the best time to start preparing to sell a business. Here are some pointers to help you decide:
Allowing enough time helps you implement changes that can significantly increase your business valuation.
In some cases, you don't have the luxury of starting preparations earlier. Some situations can force you to start preparing to sell immediately, such as:
Preparing a small business for sale in good time offers several benefits for all the parties involved. Let's see some advantages you can enjoy as the seller:
While there are tens of questions to ask when selling a business, here are the most important ones to consider:
Here's an in-depth look into how to prepare to sell your business:
Determining why you want to sell your business helps you get into the right mindset.
There's no expressly right or wrong reason to sell what you've created over the years. You shouldn't get too hung up on the details; instead, try a combination of several reasons.
You should also determine when to sell your business, ensuring the timing is perfect for selling effectively and maximizing your profit.
Try to get business sale experts on board from the get-go.
With the right experts, you no longer have to struggle through the activities. They can help you with them, even completing them on your behalf so you can concentrate on your business's pre-sale health.
You'll need a team of M&A experts, including business appraisers, to thoroughly assess your business and produce an objective business valuation report.
You can assess your business yourself because you know it much better than the experts, but you may not be impartial. Potential buyers may easily see through your impartiality, which could kill the deal.
You can complete some of the activities in this step. For example, you can gather all the historical financial documents for the last 3-5 years.
Some critical financial documents include balance sheets, cash flow statements, tax records, financial projections, and income statements. You can also provide the pending accounts payable and accounts receivable.
Your M&A team examines these documents and adjusts or standardizes them where applicable.
The team can then deduce your business's financial health in terms of profits, cater to expenses, liquidity, and ability to pay debts.
Potential buyers like to see businesses that are legally compliant and open about any past or ongoing litigations.
Some key details to prepare for the legal aspect include contracts, agreements, licenses, permits, unresolved disputes, and compliance certifications.
Operational efficiency is one of the measures of a business's financial and general health.
After a thorough assessment of your business, your M&A team can show you areas for improvement to increase its value.
The aim is to eliminate all processes or procedures with little to no value, especially the ones that slow you down or cause confusion within the business.
For example, you can reduce or eliminate manual data collection, excessively complex workflows, unnecessary meetings, poor communication channels, and redundant reporting systems.
Reverse due diligence involves examining your business from the buyer's perspective to identify potential concerns that could tank the sale or reduce your exit value.
Here are key things to consider:
Besides operational efficiency, you may have other opportunities to maximize the value of your business before the sale.
Your M&A team typically recommends improvements based on their assessment of your business's strengths, threats, opportunities, and weaknesses.
Some common ways to improve the value of your business include:
These improvements can make your business more attractive to potential buyers, raising buyer competition and increasing your sale price.
Your M&A team prepares various marketing documents and materials to convince potential buyers to buy your business.
They can prepare a redacted business profile or teaser, brochures, confidential information memorandum, advertising copy, and advertisements.
Additionally, the experts help you handle other documents throughout the sale process. They can handle indications of interest, letters of interest, M&A NDAs, term sheets, and merger or sale agreements.
While you can find a buyer for your business yourself, it's better to work with M&A professionals.
They can help find a buyer sooner by first marketing the business to their pool of pre-vetted and pre-qualified prospective buyers.
The preparation phase continues beyond finding a buyer.
Your team of M&A experts can help you negotiate the most favorable terms and conditions for the deal, including the deal structure and the purchase price.
Once the negotiation stage is over, all you have to do is complete the deal. You'll receive your payment, transfer the business to the new owner, and help them with the transition and post-sale integration.
Like the sale process, the preparation phase presents various challenges you must overcome to increase your chances of a successful exit. Here are some strategies to consider:
At Exitwise, we connect business owners like you with top industry-specific M&A experts to help optimize the process of selling a business. Here's how this works:
Schedule a chat with the Exitwise team today to learn more about optimizing your business sale.
Let's wrap up with questions business owners ask regarding ‘how to get my business ready to sell’:
The critical requirements to complete to be ready to sell your business include:
The legal document preparations required for a business sale include:
You can determine the value of your business yourself, but it's better to have an M&A team do a professional business valuation for you for optimal objectivity and accuracy. Depending on your business's situation, they can use the income, assets, or market approach.
When preparing to sell your business, having a checklist helps you avoid the risk of skipping any essential steps necessary for maximizing your exit.
You can use our checklist to see how far you've gotten in preparations and what remains.
Even if you can do some of the activities yourself, you'll want to delegate to a team of M&A experts to streamline the preparation and sale process further.
When you work with Exitwise, we connect you with top M&A experts in your industry to help you with pre-sale preparations and the entire sale process. These experts can help you sell faster under the most favorable terms.
Reach out to us today to streamline your business exit!
Let Exitwise introduce, hire and manage the best, industry specialized, investment bankers, M&A attorneys, tax accountants and other M&A advisors to help you maximize the sale of your business.
