Initial considerations when thinking of selling your business

Most business owners spend years thinking about how to grow their business.

Far fewer spend enough time thinking about how they will eventually leave it.

Before you start preparing your business for sale, here are two headline considerations as they will make or break your ideal deal.

1. Who is your dream buyer? #

Here’s an exercise many owners overlook.

Who might actually buy your business?

Perhaps it’s your management team as part of an MBO or succession plan. Perhaps it’s a competitor or larger company making a strategic acquisition. Or perhaps it’s an investor.

Think about this as you would marketing.

Create a “dream list” of potential buyers — you could even identify specific organisations.

Then ask a more interesting question:

What would make my business particularly valuable to them?

Understanding what potential acquirers are looking for can help you shape the business accordingly. Instead of simply building a company you hope somebody will buy, you’re developing the characteristics that your likely buyers value.

2. What’s your number? #

Finally, there is valuation.

There are numerous methods for valuing a business, but ultimately a transaction requires two numbers to meet: what someone is prepared to pay and what you’re prepared to accept.

So, what’s your number?

Is it an aspirational figure? Or have you calculated what you actually need from the business to fund the next stage of your life?

Write that number down. Put it somewhere safe.

When an offer arrives and emotions are running high, having previously considered what you really wanted may provide a useful reference point for negotiations.

Of course, the headline price isn’t everything. Whether you’re required to remain in the business during a handover, how and when consideration is paid, and whether part of the price is contingent on future performance can materially affect the value of an offer to you.

Prepare your business for sale from now! #

Here are ten things to think about as you prepare your business for sale or create the best business that your ideal buyer wants to buy.

1. Build a business that works without you
2. Get your finances in order
3. Reduce customer concentration and reliance of one or few
4. Create predictable revenue
5. Protect your intellectual property
6. Document how the business operates with SOP’s
7. Strengthen your management team
8. Review contracts and compliance
9. Understand what drives value
10. Start preparing before you need to sell