Getting your best deal when you sell your business is a major challenge. Unfortunately, it is a process all too many business owners take too lightly. They end up settling for less when they fail to employ strategic business thinking to all elements of the selling process and transaction. To help you get your best deal; I have developed a ten-step process you can follow to help you achieve your goals.
One thing I've found is that getting your best deal often depends on recruiting and using the right team of advisors. These advisors include your attorney, accountant, financial planner and consultant and/or investment banker. These professionals comprise the team you will need to achieve the most dollars and the best terms. Each has his/her own specific skills and you will need them all. The few dollars you spend for professional assistance (usually 10%, or less, of what you receive from the sale (as you receive it) will more than pay for itself in getting you a better outcome. The steps in this process appear deceptively simple but require discipline, hard work and sometimes painfully honest self-assessment. They are:
#1 Develop two written lists of goals -- your lifestyle goals and your business goals. In short, what do you want to happen in your life once you've sold the business? Develop each set of goals separately. This helps you keep perspective. Compare both lists. Don't be surprised to see conflicts. Resolve all conflicts between the two goal sets and prepare a coordinated list, keeping business and personal goals separate but on one sheet of paper. Share the list with your leadership team. They will, in most cases, be staying on (and locking them into their jobs may be key to achieving your objectives). Ask them for their opinions -- in writing -- of both the goals and the potential impact of attaining the goals on their areas of responsibility.
#2 Use your lists of goals to generate a criteria checklist. Items for this checklist include: minimum selling price (see #3 below) required to close any gaps in your financial (estate) plan and ensure success in your retirement or in your next endeavor; type of buyer most suitable to run the business; timetable for sale; objectives to achieve prior to any sale (including employment contracts, shadow equity or equity for key team members); transition period and contract for you; desired terms and conditions; and, other financial issues. Divide your completed checklist into MUST items, those things a buyer and/or sales transaction must have for you to close a deal, and LIKE items, those which while nice to have are not essential to the sale. A good, solid checklist takes time to develop, but it will keep you on target.
#3 Pricing is important. While you MUST get your minimum-selling price, you will almost certainly want more. In addition, you probably want to establish an asking price that allows some room for negotiation. You should have your consultant or one of the other team members prepare (or commission) an independent valuation of the company. The valuation will give you a good starting point in establishing a realistic pricing strategy. Ideally, the valuation should allow you to compare several valuation approaches to the company's worth. These computations can be based on: multiples of earnings approaches; asset value plus goodwill; or some of the many sophisticated cash flow models. Knowing how much to ask and under what terms are central to your success.
#4 Take a look at all the preparations completed to date BEFORE even looking for a buyer or dangling a tantalizing "carrot" in front of an eager prospect. Be brutally honest with yourself. Have you considered all the contingencies? Have you reviewed and considered all your financial plans? Would strengthening the business over a short period result in a greater selling price or better terms? ARE YOU READY TO LET GO AND WALK AWAY?
#5 Evaluate specific potential buyers against your checklist. Prospective buyers for small- to medium-sized companies can be found in local and regional publications, as well as The Wall Street Journal, under Business Wanted or Business Opportunity. Investment bankers, venture capitalists, local banks, accountants and attorneys, in addition to many business brokers, are all potential referral sources for transactions. Your management team may be ready and willing to make you an offer. A family member might want to continue the business. Customers and/or vendors and/or competitors might have interest. Research companies and individuals whose business interests fit your criteria, but don't make any announcements until you are truly ready to go public and tell the world. (Once you announce the company is for sale, there will normally be more "tire kickers" than you want to deal with.) In addition, some competitors will almost certainly use such information as a way to attempt to