There’s no such thing as preparing too much when it comes to selling a business. In fact, lack of preparation for selling a business is the biggest reason that deals fall through or business owners end up losing money. You can even include a clause regarding the sale of the business when you buy it. This is especially important if you go into business with a partner or you plan to have shareholders. The initial agreement can help to avoid major disputes years from now.
Another reason advanced planning is so essential is that you can make several costly mistakes when you try to sell your business in a hurry. Buyers can recognize desperation and will likely try to use it to their advantage and your detriment.
Get All of Your Documentation Together
Considering how much money your buyer is about to spend, you shouldn’t feel surprised if he or she asks to review multiple documents pertaining to your business. Some of the most common documents that business buyers ask to see include:
- Customer contracts
- Supplier contracts
- A detailed description of business assets
- Employment contracts
- Minute books
- Financial documents such as bank statements and tax returns
We recommend creating a document called a CIM, or confidential information memorandum, that provides potential buyers with a high-level overview of your business and its financials. In addition, consider finding a quiet, distraction-free room for the buyer to review requested due diligence documents. Although you can remain close by in case the buyer needs clarification on something, give him or her the time and space to review the documents without adding pressure to make a quick buying decision.
Work to Get the Highest Possible Price for Your Business
Your business will look most valuable to a potential buyer if you can clearly demonstrate a pattern of increasing profits and a stable performance over the past several years. When you know that you plan to sell, make it a priority to launch a marketing campaign that reaches a diverse base of customers as well as generates repeat purchases from the new customers. Another thing you can do to boost profitability is to complete an in-depth analysis of each business process and look for ways to improve efficiency in all of them.
Remain Patient and Expect Delays
While you might be in a hurry to offload your business and retire or move on to new ventures, your buyer is likely dealing with several situations outside of his or her control. That includes such things as gaining approval from a business lender, seeking out investors, and working out details with his or her own business partners. It’s okay to ask when you can expect completion of certain actions, but excessive contact could turn the buyer away entirely.
Remember to keep your own emotions in check and to remain professional throughout the transaction, regardless of how long it takes. If you’d like assistance in preparing to sell your business, we are here for you every step of the way.
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