Are you ready to sell your business?
Many entrepreneurs are not successful at selling their company and in the end they often have sellers remorse. According to research from the Exit Planning Institute, 75% are not satisfied with the end result one year after the transaction. How do you make sure to become part of the 25% who are happy with the transaction in hindsight?
To close a good financial agreement, your company must be interesting to the buyer. This may sound obvious, but a lot of people do not deeply understand this. You always and only sell to the needs of the buyer. After all, they must be able to benefit from the purchase. What does a potential buyer truly look at? Only a few things are really essential. The rest is nice to have.
- What is the revenue and profit over the last three years? What is the forecast for the next three years? A growth projection that is built on previous accomplishments and a thoughtful strategy will certainly help increase value.
- Who is leading the company? Will you be missed? Will revenue and profit continue to grow in a predictive way when you are gone? Do you remain active after the sale? Or are you gradually reducing your time? If you stay active, the value of your company increases.
- Which and how many customers do you have? A large group of customers leads to fewer risks for the buyer. Certainly, if there are underlying contracts, this will increase the value.
- How many employees and suppliers do you have? A good spread increases the value and reduces risks.
- Do you have any patents that will be included? Patents can increase value.
Potential buyers can usually be divided into a financial or a strategic buyer. A financial buyer is mostly seeking to make more profit than you can make on your own, with your current approach. They do this by saving costs, by merging and reorganizing. Private Equity parties are known to be masters at this. There is also a lot of difference in approach between different private equity parties. It is definitely worth looking at this in a profound way. And not lose yourself to generic opinions about Private Equity.
A strategic buyer buys your company because it fits in the strategy of their own company. With the purchase, the buyer takes steps to implement their strategy. This creates value. A strategic buyer often pays a somewhat higher price than a financial buyer.
Selling a business is not easy. You have to start the entire process years earlier. At the same time, you have to remain flexible because things can take unexpected turns. Good timing is therefore just as important as all the other things.
No matter how important the financial side of the deal is, it is not the only thing that counts. Keep an eye on everything that will be impacted: your employees, customers, suppliers, the future of the company, all relationships and your own future.
Hopefully this inspires.
Paul Donkers
Of course the personal part is just as important as the rest. What are you going to do? Are you really prepared?
Our consultants from our business coaching practice can assist you with the entire process. To prepare, during and after the transaction.
