If you’ve made the decision to sell a business and are ready to start making preparations, then there are a number of questions you must pose to yourself.
This is the first you need to ask yourself, suggests Philip Marsden of Vantis Corporate Finance, which advises on the disposal of businesses: “Is selling a business an unplanned reaction to the receipt of a tempting offer? If so, the seller is unlikely to get the best price and should beware.”
Because however tempting an offer might seem, you’ve not exposed the business to the market and a range of potential buyers. Without competing bids there’s no chance for an auction-induced escalation of the price.
Marsden, who has overseen countless mergers and acquisitions, advises sellers to consider if the timing is right. “A common error is to sell to late,” he says.
You need to “groom the company towards sale,” he adds. You want to maximise the value of the business, making it as attractive a proposition as possible.
This can range from obvious, aesthetic improvements, such as cleaning your premises, giving them a lick of paint and so on, to diversifying your customer base, strengthening the management team and closing as many deals in the ‘pipeline’ as possible to boost the balance sheet.
The third consideration is to “prepare a realistic projection of the company’s prospects with supporting evidence.”
Finally, you must consider “sharing your plans to sell with key customers and management.” Management’s feedback could be invaluable, in how you prepare the sale and whether selling is a good idea at all, while customers and management can give you an inkling about whether they are likely to desert the company post-sale, which can have serious implications for the business’s value if buyers are aware of your importance to the business.