How Much Do You Really Know About Selling Your Company?

It can be difficult to decide to sell your business. Chances are, you have poured your blood, sweat and tears into making the company what it is today. You want to be certain you are handling the sales process in the most effective way, so you will feel satisfied with the results of the sale. In other words, you do not want to make the common mistakes business owners make every day as they sell their companies.

Although selling a business may appear to be an easy task, the reality is there is much more to the process than finding a buyer, agreeing on a price and signing some paperwork. Let’s face it; this isn’t like selling your golf clubs on eBay. Many business owners, even those who are excellent negotiators, make significant mistakes when it comes to the sale of a business. It is a complex, involved process that takes preparation and know-how to come up on top with a successful sale under your belt.

If your objective is to do more than just sell—meaning you want to make the most money possible from the sale—there are certain areas you must consider in an effort to avoid costly mistakes.

You Need Help
Throughout the sales process, you will need advisors to provide you with sound advice and guidance. Most importantly, you need an investment banker. Representing yourself with an investment banker allows you to continue running your business during the often lengthy process of selling it.

Business must continue to go on as usual or else the end sale will suffer. An intermediary takes care of the complexities of managing the process and frees up your time to focus on maximizing the value of your business.

Be Prepared!
There are many areas in which you need to prepare yourself for the sale of a business—from being emotionally prepared to let go of a company that has been a significant part of your life to actually preparing your business to reach its maximum attractiveness to buyers.

How do you prepare a business for sale? Many components go into the value of a business—from earnings streams to the way the business appears to the public. It is important to identify the potential value detractors of your company, and consider them as you prepare your business for sale.

The Right Time to Screen Buyers
It is wise to screen and qualify buyer prospects prior to revealing the name of the business and disclosing financial reports. Intermediaries are able to screen the prospects to determine if they are a good fit for your business, before the potential buyers know anything about the actual company. This protects your business from unnecessary disclosure of information.

By screening buyers and keeping the sale as private as possible, you not only protect the sales process, but you also protect your still-running business from losing employees and customers who have heard through the grapevine you are selling.

Non Disclosure Agreement
You just cannot get around this one thing. In order to protect your business, you must have all buyer prospects sign a Non-Disclosure Agreement before relaying any confidential information. If you just make it “standard protocol,” you do not have to worry about offending a prospect. Without a signed Non-Disclosure Agreement, you increase your risk for losing confidential information, from trade secrets to personal details that could negatively affect the sale of your business.

Asking Price: Hold Your Tongue
Stating the asking price for your business may not only turn off potential buyers, but also can cause you to lose value. If you submit a price that is too high, you may find yourself with few interested buyers. On the flip side, asking a price that is too low knocks out the chance of receiving buyers who would pay much more for the business. What is the best tactic? Don’t give an asking price.

Prospective Buyers: Don’t Put All Your Eggs in One Basket
A common mistake when selling a business is to focus on one buyer at a time. Working with several buyers allows you to have multiple options. In addition, it puts you in a much stronger negotiating position.

Objective: Keep Your Eye on the Ball
In the excitement of finding prospective buyers and the desire to sell a business, it is easy to lose sight of the objective. It is important for the seller to stay focused and remember that the objective is more than just selling, but rather to complete the sale effectively, professionally, and to receive the most money from the sale.

When the seller becomes too focused on just selling the business, it easy to overlook red flags and potential problems with a buyer prospect. Furthermore, make sure you are remaining in control of the process. Do not allow the buyer prospects to push you into a deal.

Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, email him or visit www.vercoradvisor.com.