Are you looking to sell your business this year?
If so, here’s some good and bad news.
First, the bad news. If you’re looking to sell right away, you probably won’t get full value, as it takes a good year of preparation to sell before you actually put your company on the market.
The good news? A lot of businesses have changed hands in the past several years, and there’s a fair amount of money sitting on the sidelines looking for good deals.
Plus, if you actually take the time to prepare your company for a sale, you’ll more than likely jump to the top of a buyers’ short list, simply because most sellers don’t do the proper “prep work” to make the sales process easy and transparent.
So how can you best set yourself up to win when you sell your company? Here are some tips to get you headed in the right direction to receive the best value for your company by the end of the year.
1. Sell your business the way you’d sell a house. Selling a business and selling a house are similar in a lot of ways -- and most people wouldn’t ever let people tour their home without making some cosmetic changes and cleaning up before offering it for sale.
The same is true for your business.
You’ll want to run for the next year with good financials, so keep your paperwork up-to-date and document everything. Outline each and every responsibility of each job and include key performance indicators that clearly establish what is expected of each player and group.
Now’s the time to get your “house” in order. Over the next 12 months, give your business a fresh coat of paint and get it tidy.
2. Start your game plan. Seek out and meet two or three business brokers in your area, as the majority of deals come through brokers.
A good business broker is invaluable, and I typically coach companies to go the broker route, as the best brokers do more than justify their fees and can both guide and counsel you through the marketing-and-sales process.
In your initial discussion, you’ll get a better idea of who your potential buyer could be, and how to best position your company to get the most value in the marketplace.
You’ll soon discover there are basically two types of buyers: Those who are looking to buy a fixer-upper and those looking to buy themselves a job.
Ideally, you’ll be looking for an investor who is looking for a business to take to the next level, and who can work with your current team and systems -- as those buyers are often willing to pay more for a business that already have effective systems in place.
3. Learn valuations for your industry or category. Another advantage of using a broker is getting solid information about the valuation models buyers will use for your company in your particular industry or category.
Different industries use different multiples. Some use multiples of profit, some revenues, and others cash flow. You can get a good handle on what the numbers for own your business simply by talking to a number of brokers and getting some benchmark metrics. You’ll also learn where the goodwill in your business is going to come from.
Generally, your database is the biggest asset you have, although you may be in a business where stock and inventory levels will figure into the equation as well. Knowing what you have to work with, or need to focus on, will give you confidence in putting together a solid informational and sales package for prospective buyers.
4. Plan your information and sales kits. Your broker will also guide you on putting together all of your materials in an overall information and sales package, one that includes samples of all of your marketing materials, in addition to an overview of your financials, positional contracts for your team, and any of your management.
Also included in this will be an overview and inventory of your assets, equipment and any physical components of your operations. Buyers will want and need access to this information as part of their own due diligence, and the more information you can provide, the better and easier the sales process will be.
At this point, don’t be overly concerned with disclosing proprietary information that would need to be covered by non-disclosure agreements or non-competes. The objective of what is essentially a sales package is to position and present the company in the best possible light to attract the right kind of buyer for your situation.
5. Prep your team. Finally, strategize, create and then implement a good communications plan with your team and management about your goals and objectives, your desired outcome and your “reasons why” for the sale.
You may also want to seek outside guidance on this process as well, as communicating a sale can be a tricky balance. Under-communicate and you could create a sense of panic in the organization; Over-communicate and you could do the same.
Your plan should not include only an overall theme or strategy, but also technical details on how passwords and transfers of phone numbers will take place. While these may seem minor, they are the types of items that can cause undue stress or worry as the process of transition winds to a close.
Finally, just be sure you also meet with your accountant or lawyer to make sure what kind of sale is right for you so you don’t pay more taxes than you need to as a result of the sale.
Also, be patient, and realize not every sales process is flawless. On average, one of three deals falls through in the due-diligence portion of the process.
While all of the prep work can seem daunting and maybe even exhausting, the more work you can put upfront into proper positioning and “packaging,” the quicker and easier the sales process will be, and the more value you’ll get in return. Ultimately, that will pay off in creating a true multi-win scenario for you, your buyer, your customers and your team.
The author is an Entrepreneur contributor. The opinions expressed are those of the writer.