Considerations before selling your business
Published April 20, 2022
Selling a business is a major step for any business owner’s life. There is a lot to consider and the potential for mistakes is high. Here are five things to consider before you think about selling your business.
Timing is everything
The timing of your sale is crucial. It’s important to take a look at the market to see M&A activity. If there has been a recent flood of M&A deals, there may not be that many buyers in the market, and you might not get the premium amount for your business. It is essential to start planning your exit early. Doing this will give you the flexibility to sell when the market is just right without feeling pressure.
When a buyer is interested in purchasing your company, they will begin the due diligence process to look for any potential red flags. Unresolved litigation matters can complicate a sale, deter buyers from purchasing your company and lower the value of your business. Perform your own pre-diligence and resolve these types of matters before proceeding with a sale.
Manage your expectations
Business owners often spend years or generations growing their organization to achieve the level of success where they are now. It is common for business owners to misestimate the worth of their company and equate passion for value. Annual valuations are recommended as a way to get a general idea of what the business is worth from an outsiders’ perspective. This will give you enough information to choose the right time to sell your business and meet your wealth objectives.
Potential buyers who are looking to purchase a company whose owner will be exiting will perform an analysis of the remaining talent to ensure the business can continue running and performing at its current level. Mergers and acquisitions can be a scary time for employees, so make sure to provide incentives to stay, and offer rewards for achievements as well as insights on why it’s beneficial to stay, even under new management.
Engagement is a crucial indicator of success to potential buyers. If engaged employees are aligned and working toward the same goals they are almost always more successful. It is important to invest in employees at every level, make sure they are working toward the mission, vision and values of the company.
Business exit planning is a complex process that requires assistance from various professionals. It’s imperative to have the team that will help you achieve your end goal.
Some of the professional to include on your team are an attorney, investment banker, wealth advisor and tax advisor. These professionals will work together to reduce risk, while maximizing profits.
We’re here to help.
For more information, reach out to Angela Marshall CPA, MBA, CCIM, CGMA at Angela.Marshall@mcmcmg.com .