In the last segment we discussed the elements that go into planning your exit strategy. The importance of setting your goals in terms of timelines, financials, and transition. Having properly planned and prepared, it’s then time to put your business on the market.
Consider that you’ve reached your revenue goals for the business and the time is right, let’s go through the steps to selling your business.
The Selling Process
There are several critical factors to establish once you have determined the time is right to sell. Even for business owners who feel they have a logical and easy transition plan to a family member, long term employee, or friendly competitor, an analysis of market value and the company’s current position and future opportunity should still be thoroughly conducted.
Starting with a thorough valuation and market analysis lays the groundwork for understanding the worth of your business in the current market. The seller deserves fair value for their work, and the buyer deserves a smooth transition, with all the knowledge and tools to successfully launch their next chapter. This initial step is especially vital if you plan to go to the open market, as it provides a realistic baseline for setting a price that attracts potential buyers while ensuring you achieve your financial objectives.
The valuation considers various factors, including your business’s financial performance, assets, market position, and growth potential. A comprehensive market analysis further adds to this by evaluating the state of the industry, identifying potential buyer segments, and understanding the competitive landscape. A good Business Broker will but these your specific company details, and the market conditions, looking at comparative sales data in your industry in recent years to offer a target price and compelling narrative for your business that resonates with the right audience.
Marketing your business to prospective buyers is the next critical phase. This involves creating a detailed marketing plan to reach a targeted group of potential buyers who have the interest and means to take forward the legacy of your business. A package called either Confidential Business Overview (CBO) of Confidential Information Memorandum (CIM) that highlights the strengths and opportunities your business offers will be used along with a detailed screening process, including the signature of a non-disclosure agreement, to determine the right match to move forward in serious conversation. Effective marketing strategies might include online platforms, industry publications, and leveraging networks that connect sellers with qualified buyers.
Once a serious potential suitor, or short list of suitors is determined, then negotiations and legal aspects are where the rubber meets the road. Having clear terms and knowing what you are willing to negotiate on is crucial for a smooth closing process. A business is considered ‘under contract’ once a letter of intent (LOI) is signed by both parties. At this stage due diligence is conducted by the buyers and their accountant, negotiations may continue through this process as details are brought to light. Once all sides are satisfied, legal documents that protect the interests of all parties involved are formalized by the legal representatives. It’s a process that requires patience, as negotiations can take time, but with clear communication and a mutual understanding of the deal’s value, it often leads to a successful sale.
Navigating the selling process with preparation and a strategic approach not only maximizes the potential of your business on the market but also ensures a transition that aligns with your goals. It’s about making informed decisions that lead to a rewarding conclusion for you, the buyer, and the future of the business you’ve built.
Co-Founder, Business Intermediary – Specializing in Business sales and Organizational Development Consulting.
As the founder of High Point Business Brokers, I am thrilled to combine my wealth of experience with a network of experts to benefit our clients. Early in my career I learned the value of a consultative approach, and that the greatest rewards are not financial, but in having a positive impact in people’s lives, careers, and businesses.
High Point Business Brokers exists to bring a long term consultative approach to business brokerage. We’re here to maximize your investment and to add far more value than a single transaction.
