Selling a company is usually a once-in-a-lifetime event for a business owner. If a deal is managed according to a proven process with experienced help, you will usually get predictably good results. If left to chance or done on an ad hoc basis, the results will be predictably poor. So, what are the best practices for a business owner seeking to sell their company?
Have Clear Objectives
You have spent years investing time, money, and energy into building your business – make it serve you the way it should. Too many business owners are too busy working in their business to take a step back and consider what they really want to accomplish with their business and its ultimate sale.
Before embarking on any sale process, take a step back and clearly articulate what you want to accomplish with a sale of your company. Is it more free time, less stress, more money, more time with family, time for retirement, or some other goal? Be as specific as you can be and then prioritize those objectives in order of what is most important for you to accomplish. Keep this document handy as you run through the transaction process to remind yourself of what you really want to accomplish with a transaction – it will be your North Star during a deal.
From a financial perspective, work with a financial advisor to get a clear sense for the transaction proceeds you need to net that will support the post-closing lifestyle you desire (after fees, expenses, and deal structural issues like escrows and earnouts).
Then get an objective view of how much your business is really worth. If there is a gap between your financial requirements and the value of your business, you will need to either reconsider your financial requirements or get back to work building value in your company.
Get Help
Selling a business in Western Australia is a complex business process. You probably do not do your own taxes, or manage your own litigation, or implement your new ERP system – selling a business is no different, and the consequences of a poor decision can be very costly.
Find: (1) an experienced deal attorney, (2) a financial advisor who specializes in helping entrepreneurs, (3) an accountant who understands transactional tax issues, and (4) an investment banker who has done a lot of deals. Their fees might appear expensive at first blush, but their counsel and advice will help ensure the biggest transaction of your life goes smoothly and you get the most out of your transaction as possible.
Develop Your Plan
With your advisors, put your plan together. This includes how you will tell your story, identifying buyers which are most aligned with your goals, preparing your business for due diligence, and having a clear personal purpose following the sale.
Execute Your Plan – Trust the Process
Utilizing a time-proven process with experienced advisors will create the best odds for success in your sale. Trust that the process is going to work and execute the plan. We occasionally see business owners who want to deviate from the process for a variety of reasons – this usually ends poorly and won’t serve you well.
Keep Your Emotional Highs and Lows to a Minimum
Selling your business is an emotionally charged experience with lots of highs and lows during a deal. The highs of getting multiple attractive offers on your business or when you sign your letter of intent for a price you never thought possible are offset by the lows of due diligence and protracted legal negotiations (all while trying to keep your business running smoothly).
Riding these waves up and down can be exhausting and cause you to make poor decisions – use your advisors to help manage the inevitable challenges that come in a sale process, and make sure to make time to de-stress. Remember, you have a great company and if a deal does not happen, you still have a great company. Never get attached to the outcome and you will help yourself remain objective and clear-headed.
This is a Marathon, Not a Sprint – Pace Yourself and Start Early
From start to finish, a typical sale process will take 6-12 months and involves a lot of effort. If you start early (even 1-3 years before you want to go to market), you will give yourself plenty of time to compile your diligence materials, address weaknesses in your story, condition the market, develop your communication plan, and prepare for the transaction process.
Trying to cram all of this into a small window of time will stress you and your team, distracting you from your day-to-day operating responsibilities, which can cause your company to perform poorly during the process (nothing kills a deal faster than poor business performance). By starting early and pacing your work efforts, you can minimize the strain of the transaction and increase your odds of a great sale that meets all of your requirements.
Selling your company can be exhilarating and stressful – with proper planning, a great team, and the right mental outlook, you can maximize your odds of making it one of the most rewarding experiences of your life. Class VI Partners can make the process easier with our years of experience in financial services and focus on personal connections. What’s more, our CoPilotTM market readiness assessment can give you insight into how investors value your business before you even get started.
Disclaimer
The views expressed represent the opinion of Class VI Partners. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. Class VI is a registered broker dealer, Member FINRA.