Selling your company can be one of the most stressful and exciting events in your life. Period. Selling a business is not an easy task and one reason why many successful business owners put it off is because of the perceived difficulty of selling your business.
You also can’t expect an expert to simply step into the process of selling your business and handle the entire things for you without a lot of effort being put forward on your part. It’s important to do your due diligence and to be prepared properly for what the sale could look like. This process is also extremely complex that is filled with numerous pitfalls that can totally derail your sale.
Even a sale that appears like it’s on track and headed in the right direction can completely fall apart. Selling a large multimillion dollar company requires a completely different process when you’re attempting to sell a small business. It’s important to partner with the right business broker regardless of the size of your company.
Small business can have very high multiples applied to them and be sold successfully with the support of an experienced business broker. There are many different questions that need to be answered along this process, including:
Preparation can make execution that much easier. By taking plenty of time and special care for the preparation process, you can set yourself up for flawless execution. However, it can be much harder to have a perfect execution of a business sale if you don’t have the proper preparation in line. Selling your business requires focus.
Considering that the sale of the company you have worked so hard to grow will likely be the biggest sale you will ever make in business; it would not be wise to ignore the preparation process or to try to handle aspects of this on your own without the support of a dedicated broker. Sadly, only a few business owners recognize the due diligence and forethought that it takes to successfully sell their company. Far too many business owners plan a quick exit and skip over some of the most important details that could have made this a great success.
Many entrepreneurs have a strong bias towards action and given that there is so much planning involved with listing your business for sale, it’s easy to skip over this and assume that you can worry about these details later. It’s very common for entrepreneurs to jump right into the deep end and get involved once they have made their decision about something. If your goal is selling your business, planning is key.
A lack of preparation, however, has so many pitfalls that could impact the rest of your sale, including reducing the cash value of your company, extending the time frame of your sale and lowering the chances of selling to the right buyer successfully. There are a few different things that you can do to prepare your company as well as yourself for being sold. This includes:
Every business owner’s exit is different and this is why each exit must be planned and ideally, with the support of knowledgeable professionals like a business broker at your side. The preparation stage, regardless of your size of business and your intended date of sale, involves numerous different steps and all of these must be prioritized and properly tackled. Selling your business is a huge proposition and it’s why so many turn to brokers.
Reaching out to an experienced business broker sooner rather than later will give that person as much preparation time as possible so that you can focus on getting your business ready for sale. If you are willing to prepare, make sure that your business broker is also knowledgeable about how to prepare business owners for the sale. This is a process that is known as exit planning and it can be just as important as the due diligence and systems documentation needed to sell the company.
If you are not willing to put in the time to prepare your business for sale for a smooth transition, then be upfront with your business broker. There are other circumstances that can dictate different situations, including those in which you are ready to make a quick exit. As long as you are upfront about this and recognize the potential pitfalls of going this route, it is far better to be honest with your business broker so that he or she can make adjustments as needed. It is critical that you have realistic expectations based on your level of preparation and the condition of your business Every team member associated with your business broker will eventually learn the truth so you can make things easier for everyone by being upfront at the outset.
You’ve probably put in a lot of blood, sweat, and tears to make your company successful. While that might be a point of pride for you and even something that your team looks up to you regarding, it can be very dangerous when it comes to selling your business. This is because you don’t want to make it challenging for a successor to replace you or to be under the impression that the business is only successful because you’re at the helm. The more valuable that you are seen in relation to the business, the less valuable the business is and the more trouble you’ll have selling your business.
An ideal situation is one in which you have taken all the necessary steps to show that you are completely replaceable. Many business owners go the opposite route of trying to make themselves completely irreplaceable. But this can do a lot of damage when it comes to the value of your business. It also makes it that much harder for your business broker to find the right buyer for your company when it comes time to sell.
The easiest businesses that can go up for sale will have many different types of target buyers, can be located anywhere in the country and do not require an operator to have very specialized skillsets. This is because of addressing one of the previous points about making yourself replaceable.
If you have highly specialized skillset that only a very small portion of the general population has, it will be extremely difficult for you to find a buyer that feels comfortable enough to step in to your company. You need to be able to show that you have done everything possible to think through this issue and have a broad enough target market of prospective buyers so that there are multiple people interested in purchasing the company.
Imagine that you are selling your company and you require that the buyer has unique skills or very specialized talents to operate the company. If only 1 out of 1,000 people in the United States have these abilities, talent, skills, or knowledge, how hard do you think it would be to find that person and then persuade them to purchase your business. If these skillsets are not easily found in groups of people who can be targeted and identified by your business broker, selling your company becomes that much harder.
If there are a rare mix of personal attributes, software knowledge, specialized skills and soft skills, it becomes even harder to find a qualified buyer. Hard skills become easier to identify because most people who have these skills have already been sorted in some form or another such that your business broker can easily target them. This includes memberships and trade associations, for example.
Streamlining your business is not a once and done activity and it is not something that you can do only on the weekends or a handful of hours per week. It can actually take several years for many companies to successfully streamline their business. Perhaps you have held off on doing this because you are concerned about the possibility that you might change your mind about selling your business once you make operations easier.
For the time being, worry about partnering with the right business broker to take you through this process and not how you might feel in the future. You can always switch later on in the process but it is powerful to streamline your operations no matter what and it becomes essential if you intend to sell your company.
As you streamline the company and work towards establishing systems and documentation that also showcases that you are replaceable, you will build a business that has much more appeal in the marketplace because it can be scaled more easily and reaches a broader range of target buyers. This foundation is critical for your business broker to understand and use to market your company, making it that much easier for your business to sell.
When it comes to scaling your business, there are two primary components that you cannot forget; managing yourself while also managing other people and recognizing the value of your marketing engine. You cannot learn to manage other people or drive them successfully towards staying on under new leadership if you are not able to successfully manage yourself.
As you are approaching the scalability and streamlining of your own business, you’ll have to have self-management at the top of your priority list. Managing yourself requires a focus on a variety of different tasks, including managing your energy, managing your time, successfully evaluating the landscape and determining your most important priorities, establishing clear goals that are drawn from strategy and always working to improve existing skillsets.
Energy and time management and goal setting are some of these skills that are the easiest to learn if you don’t yet have them in your wheelhouse, but there is a good chance that as a leader you’ve already tapped into some of these skillsets already.
When it comes to the value of a marketing engine, you will not be able to easily scale your business without having a properly converting marketing funnel or engine. Sadly, far too many business brokers have encountered business owners who have the best of intentions enlisting their company for sale and have in fact spent years trying to make their systems function more appropriately and streamlined without putting in the necessary efforts and time into marketing the business.
Marketing the business can greatly improve the brand awareness and the overall perceived value of the company. If you go for years without making the right investments in terms of finances and money in your marketing engine, you won’t have the revenue that is necessary to pay consultants, employees or contractors who can become the cornerstone of your streamline and scale process. By growing your company and keeping marketing at the core of that conversation, you will be able to grow your revenues, which can make it that much easier to hire the experts you need when the time comes.
Systems also have to be built around marketing just as you would systems for hiring or your accounting. Documenting, building and automating are core components of streamlining your business. In order to streamline your business, you will need to build systems into all aspects of your business by stepping back and being honest about where you are and where you’d like to go. Secondly, you’ll also need to document all of your operations so that it is perceived that it is easy for someone else to step into running this business with very little background knowledge or awareness of the company.
Furthermore, you will also need to build a team of managers and core employees that can be relied on for scaling the company up. It is good to do recommended readings and learnings in this process and to partner with your business broker to determine whether you already have the right people on staff. There is a chance that the people needed to grow your company and to make it especially valuable to prospective buyers on the market don’t yet exist on your team so be open to the fact that you might need to make some adjustments in your accountability chart.
When it comes to technology and other systems, look for every possible opportunity to automate processes. The easier it is perceived to run the business on a day to day basis, the more buyers you can broadly appeal to. You might leverage both technology and human talent when looking for ways to streamline the company but don’t rely too heavily on one or the other. The vast majority of businesses will need a little bit of each in order to be successful and to be sold by a knowledgeable business broker. For more information, schedule a consultation with a trusted and knowledgeable business broker.
Business owners who had it on their radar to sell their company in 2020 are definitely taking a step back and leveraging their team of professional advisors to decide the most appropriate step. Since COVID-19 essentially locked down the economy and the country, there are new and different considerations to take into account. Having an existing relationship with a knowledgeable business broker can help you significantly when approaching this process.
Selling some kinds of businesses might be more difficult but others will have little trouble when moving forward or even find that they can capitalize on a solid business valuation because of the minimal or positive impact their company sustained from COVID-19. This is a case by case situtaion and one that should be reviewed by an experienced business brokerage. Some businesses have been critically affected by COVID-19 and will likely face these impacts for many months or even years to come. However, others will be able to weather the current storm and be able to come out on the other side with stronger earnings after the fact. Since business valuations are determined over the course of a series of years rather than one moment in time, it is important to consider whether or not you might still be in a favorable environment for business valuations. A few months or a couple of weeks of the downturn can be addressed by big earnings in the years prior.
Furthermore, intelligent buyers understand the specific nature of current market conditions and will take this into account when looking at the bigger picture of selling your company. A new buyer cohort is also being created as a result of the pandemic. Managers of bigger companies who have personal assets or could potentially see termination due to covid are thinking about acquisition as their next career steps.
Many professionals are reporting that they are getting more inquiries for those in these situations. Strong prior earnings in your company might help you to move through the downturn more successfully. A business that experienced steady growth previously, such as from 2017 to 2019, might have doubled their revenue. Many clients can still enjoy a very high success rate for selling their company depending on if and whether you retain an experienced business broker. A business broker is there to assist you with every step of the process of selling your company, from business valuations and deciding what elements of your company you should work hard to tweak and improve prior to listing the company for sale.
In addition to helping during the negotiation phase, our business brokers are continuing to receive inquiries from people who want to buy a company and are taking advantage of this market to step forward with their business buying decisions. Schedule a consultation today with our business brokers to learn more about how this can help you.
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