What can I do if I am thinking about selling my business?

It is incredibly useful to understand all of the various considerations and possible viewpoints that go into the sale of a small or medium size business.

As I am fully exploring the opportunity to acquire established and profitable b2b small and medium sized businesses ($3-$75M/yr. in revenue), I have come to the realization that I have so much to learn in this space.

Like several others such as Ryan Condie, Sam Giampapa, Jr., Eric Standlee, Micah Clay, Landon Greenhalgh, and Walker Deibel to name just a few, my world has been transformed 180 degrees by the prospect of acquiring an established small or medium size business.

By no means is this everything to reflect on but wanted to share some useful thoughts and considerations that are beneficial for both the seller and the buyer to be aware of.

First – Why Are You Selling?

The first thing you have to ask yourself is why do you want to sell in the first place?

1.      Do you need time off

2.      Are you burned out

3.      Is it a bad financial decision driving the sale

4.      Are partners pushing you out

Next, be sure to seek out other people who have sold their businesses and ask them if they regretted it or never looked back after selling, to help you get some perspective.

Set Timeline Expectations and start with the end in mind

Setting a timeline can help you work backward establishing benchmarks to reach before that deadline of selling.

1.      Remember to watch the market and remain nimble, so you can pivot if there are changes between now and when you want to sell 2, 5, 10 years from now.

2.      Also – don’t start to lose focus. It may be a natural reaction to let off the gas and start coasting but this time now maybe more than ever before is crucial to continue to grow and create continued momentum.

Know Your Exit Strategy

Build a complete strategy, to include who is your ideal buyer.

1.      It could be anyone with a checkbook or a trusted partner who needs your systems and technology to grow their own business. Maybe someone that has a complete different set of skills and experiences than you but are perfect to take your business to the next level. Be specific and don’t limit yourself here.

2.      Whoever it is you need to have that buyer in mind, so you are discerning when the time comes to decide between multiple buyer interactions and offers.

Define Your Buyer

At a minimum, there are four different kinds of buyers to look out for when you go out and start the process to sell your business:

1.      A buyer that is interested but can’t afford it. They might be attempting to learn more about the industry and have a genuine interest in your company. These interactions provide great “training reps” for you as the seller to get comfortable sharing your business with a potential buyer. But keep in mind, that these buyers are not going to ultimately make an offer and so adjust your effort accordingly.

2.      A buyer that can buy 10 of you but has no interest in you personally. Hey, sometimes it is all just business. Be sure that you are able to clearly identify if these interactions are ones that you want to pursue further, or would you rather hold out for the “right” buyer. There will be no personal connection or relationship developed here and the buyer will most likely want you out of the picture sooner than later.

3.      A buyer that only wants insider information and won’t buy at all. Beware of these and usually you can spot these folks before divulging to much of your hard-earned time or information.

4.      Finally, the buyer you want! They have the financial potential to close on the right deal, are genuinely interested, and are willing to create a deal that works for all parties involved.

Increase Value of Your Company

Think about it like selling your house. Investing money to improve your house before a sale can net you more money on the back end.

1.      You could hire a CFO who has experience with these types of transactions or improve your sales force and technology. These value increases can net you more money.

2.      There are many ways to increase the value or quite simply create the perception of increased value.

• Coming up with several growth opportunities that the buyer can take advantage of immediately is always attractive.
•  Another option is to ensure your financial records are neat, orderly, and able to be packaged in a way that makes life much easier on the buyer when they are evaluating your business.

Call Lawyers and Organize Contracts

When you sell your company, you are going to need to show the buyer pretty much everything. Get on the phone with your attorney, today, and have them bring all your contracts and agreements into one place ready for a sale.

Have a Good Story for the Buyer

When the time comes to sell, you need to update your company’s story to one that will attract your ideal buyer. This goes beyond a great pitch deck. Your story needs to be reflected in your office space, your website, your marketing materials, and your people.

The Negotiation Process

The time has finally come! There are two ways the negotiations can go down: The owner sells the company themselves OR they hire an M&A Broker to shop the business around to potential buyers. Both routes have their advantages and potential disadvantages.

PRO: without the services of a broker, a buyer can get connected to you through a mutual connection in your network and many times these are the best buyers. The whole process happens organically, and it can lead to the perfect match.

PRO: A broker may help give you an accurate valuation for your business so that you are confident and prepared to have a conversation with potential buyers

PRO: Brokers have an immediate Rolodex of potential buyers that they can get your business in front of.

CON: Brokers cost money, can really slow the sale process down, or share your business with potentially the wrong crowd of buyers.

*at some point and at some level there will almost always be a financial adviser / intermediary involved in the sale of your business.

Companies are Bought Differently

There are a bunch of different offers that you could be presented with when selling your company:

1.      Straight cash, no commitment, no non-compete. Fairly rare

2.      A non-compete sale with a term limit of a few years. More common

3.      They could buy in exchange for stock options instead of cash or mixed in with cash. More relevant for large deals $50M+ or public companies

4.      Finally, they’ll buy the company and offer you a salary to stick around for a short time after the sale. More common

If you know of anyone that may be interested in selling their business, let them know that I would be more than happy to have a quick initial conversation with them to see what the possibilities are.

As always, please feel free to connect and reach out to continue the conversation with any comments/questions.

Until next time …