The process of selling a business is not as simple as putting it “on the market”, seeing a bunch of prospective buyers, negotiating a deal, and walking out. “Well of course not,” you may say. “There are always complications.”
Expecting complications is one very small step in getting your mind right for the process. The other steps are many, and varied in size.
How to sell a business from the end
Say what? Most successful products are designed with the customer in mind. The creator identifies a need, a desire, or an improvement. They then design a product or service to solve, satisfy, or fill it. If you already have a business, that process is not entirely feasible.
But we do want to consider the closing stages of selling the business. If you have never sold one before, this may be difficult to appreciate. You may envisage a board-room with a bunch of papers being passed around for signature, followed by a notification on your phone of "funds received."
Clean, sweet, easy. Take that travel-break you have been dreaming of, or start your next project with full funding.
That may indeed be the last event in the process - business sold! In more than 30 years in the M&A industry I have indeed seen the sale of a business happen in just such a quick, clean, and final manner. But it only happens following the rigours of proper and exhaustive preparation.
The real “how to sell a business”
Prepare Your Business For Sale is the process of enabling that ideal event. It starts with the end in mind:
- We want the dream signing and receipt event.
- The agreements and payments stage requires a financing due diligence by a financier.
- The financier requires an instruction from a buyer.
- They became the buyer following a successful due diligence process.
- A due diligence needs to be prepared with its own diligence so it is ready to go when the prospect is hot.
So here we are in “how to sell a business”: What does a business owner have to prepare to make sure the end due diligence is successful?
Do not ignore preparation
Of course, more often than not the business owner will jump into the selling process without proper preparation. It goes like this:
- Seller decides to sell the business
- Assuming the latest annual financial statements are prepared
- Seller appoints a broker to find a buyer. They may even appoint more than one broker
- The broker must show early progress, and so places an advertisement on a website
- The broker can show even more progress by tapping into a list of potential buyers who have been interested in previous businesses they have represented.
The seller can be very quickly overwhelmed by interest in the business. It is not unreasonable to assume the broker, so early in the relationship knows very little about the business. And so he requires the seller to answer all the questions which prospective buyers may have.
Generally, all interviewers between buyers and the seller will be on a one to one basis. And each of those meetings will take an hour or longer. This is a problem for sellers.
Regurgitating the same answers over and over while they are unable to pay attention to the very thing they are selling.
But it gets worse: each potential buyer asks slightly different questions, in addition to the usual questions asked by all of the buyers. Those bespoke queries require attention and time to present the answers.
It almost makes one wish there was a program to Prepare Your Business For Sale so that a comprehensive pitch can be prepared, able to answer every possible question, and have the source documents available for approved buyers to inspect for a time period, without the seller losing control of what is taken away by unsuccessful buyers.
Preparation is fundamental to how you sell your business
I would love to start this summary with: “once you decide you want to sell your business...”, but the truth is that every business should always be prepared for sale all the time. Even business owners get sick or very sick. They also die, sometimes without warning.
Yes, perhaps you are here now looking for an answer to “how to sell a business” because that is next on your to-do list. But what if it is your heirs here, right now, looking to see how to sell a business they know nothing about, are unable to run themselves, but need its value in their pockets?
I have dealt with too many grieving survivors wondering where to start, too many spouses of business owners incapacitated by accidents, sudden health issues, or crime. I have 30 years of helping people pick up other people’s bits of business pieces. And that is why this website is here.You need to know from now on how to sell your business.
You need to Prepare Your Business For Sale.