Thinking of selling your business? Identify your weaknesses before your buyers do
Updated: Nov 19, 2021
When thinking about selling your company there are many important factors that should be considered. One of them is also to always have an eye on the market if the right offer appears. If you identify those factors wisely and smart, it can help you maximize the value of the transaction. You should know, that selling/buying process is expensive and demanding for both sides and is really not an easy task. It is stressful and risky because you have one ultimate opportunity to get the sale right.
One thing is utterly important - your buyers will rigorously look into your business and will identify all the shortcomings and risks, some of which you might not even identify. This means that good preparation before start of selling the company is really important. Good preparation can help make your company more attractive for potential buyers or investors. You can definitely prepare yourself in advance – you can start preparing your Due Diligence documentation in advance (for just in case), but have in mind – keep things simple.
Potential buyers will deeply check your company's past and track your current performance and growth. Promises for the future are not so important for them. Their perspective is that value comes from existing business. During the long period of negotiating and get to know each other, the buyer is constantly evaluating your company and checking the cash-flow. For the buyer is also important that the company he intends to buy comprises with his company's growth strategy. That is why is very important to understand who is the potential buyer, how he thinks and what is his strategy. This is the stage where you have to convince them that your company is perfect catch for them.
It is also important to know that first transaction will probably happen during the period of next 2 years. So most probably this solution cannot be your escape if you don't have positive cash-flow.
To start your thinking process consider next questions:
Autonomous business: Are your business processes working in a way that the owners has little influence on a day to day operations and key decisions?
Risks: Are there any risks that could importantly hinder or be a threat to the long term business? Think about customer and supplier relationships – are they tied to the owner? How high are the entry barriers to enter your market?
Benchmark: You should clearly know how attractive is your business compared to your competition. Are you overperforming them or underperforming? Best in class companies reach higher EBITDA and exit values.
Keep in mind, that sale process consists of next steps: identifying potential buyers and prioritize them, approaching to them and making a contact, checking if they are interested in your company, negotiating about the price, reviewing the proposals and evaluating the offers, preparing the drafts of the documents, managing your tax position and making the final step – closing the deal.
We can help you to identify all those key factors and help you to prepare your company for successful sale. In this way the sales process will be smoother and with bigger outcomes.
This document (and all information accessed through the links in this document) is for informational purposes only and cannot be considered as legal advice. The facts stated therein may have changed since the date of publication. You should seek legal advice before taking any possible action.