If you are selling a business, you are well aware of the daunting task that lies ahead, and you may even be unsure of how to begin. It's important to plan ahead for a liquidity event, but after you have prepared your business for sale, how do you get started with the sale process? A successful sale often takes time, energy and patience from the buyer and the seller. The following five steps will help get your business sale on the right track:
1. Lay The Groundwork. It is important for you to determine exactly "why" you are selling and "whom" you want to sell to. Are you selling because you have to or are you selling because you want to? Do you want to sell your business to another small business owner or are you OK selling to a larger company as an add-on acquisition? Or maybe you plan to sell it to another generation of your family? You've spent a lot of time building your business, so it is important that you are comfortable with the direction your business will be taken after the transaction closes.
2. Pursue a Business Valuation. If you haven't done so in the recent past as part of your exit strategy, you may want to start the sale process by having an independent business valuation performed of your company. A business valuation will give you an estimate of what the fair market value of your business is, or what a hypothetical buyer would be willing to pay for your business. The business valuation won't necessarily tell you exactly how much you will get for your business, but it will offer a point of context for negotiations.
3. Due Diligence. As part of the sale process buyers will want assurance that the information you are providing to them is accurate. A quality of earnings report, generally performed by an independent third party, is a review of your company's earnings stream, among other things, and gives the buyer comfort with the information you have provided. Additionally, when performed in conjunction with a business valuation, the quality of earnings report can add credibility and provide more substantiation to the valuation report.
4. Bring in a Business Broker. Finding the right buyer can be very difficult without a business broker. A business broker will market your company to thousands of potential buyers, create a visually appealing teaser sheet as well as a confidential information memorandum, if necessary, and help you negotiate your purchase price to obtain top dollar for your business.
5. Turn to an M&A Attorney. Although often overlooked, hiring an attorney that specializes in mergers and acquisitions is an important step. Most M&A attorneys have seen good transactions as well as bad transactions and can anticipate issues before they arise. Their insight can protect you from future liabilities.
This list is a starting point, and the facts and circumstances for each transaction will be different. By implementing an effective exit strategy and utilizing these five steps when selling your business, you will be well on your way to maximizing your purchase price. You will also help ensure a smooth transaction and be comfortable with the direction your business is taken after the sale.
To learn more about selling your business, visit bswllc.com or contact Bryan Graiff, Partner in Charge, Transaction Advisory and Litigation Support, at 314.983.1390 or bgraiff@bswllc.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
