Building a business takes grit but, for many entrepreneurs, selling a business is actually the most stressful part. You've finally hit the big time and made a success of things, but now you're going to give up a big part of your life – even if the payoff does soften the blow somewhat. If you're going to get what you deserve for your baby without the pressure getting to you, it's extremely important to be prepared.
Plan way ahead
There's so much to get right in a business sale that you should give yourself plenty of time to prepare. 'The most important thing to do is to plan way in advance – probably three to five years ahead,' says Nick Brown, who runs business sale advisory firm Corporate Exit, and also has a business expert slot on Jeremy Vine's Radio 2 show.
Be clear about your objectives
If you don't know ahead of the negotiations what you want to get out of the process in terms of the valuation and structure of the deal, then you're going in there without any sense of what to ask for and could potentially get screwed over. It's worth having in mind certain red lines that mean you will be prepared to walk away from the sale.
'I've seen quite often deals fall over because the seller goes off on a bit of a tangent about what they want – perhaps they go chasing something in the deal that was never really on the original list of criteria to start with, but they get caught up in it,' says Tim Hardman, managing director of M&A advisors Avondale.
Identify a potential buyer
Sometimes you'll be lucky enough to be approached directly by one or more people who want to buy your company, but if you want to sell you might need to make the approach yourself. Either way, you need to make sure your due diligence and business model are geared towards impressing a potential buyer. And that means you need to know what kind of party is likely to be interested.
'If you look at the kind of businesses that have been acquired and the companies that have acquired them, you tend to get a feel for the kind of businesses that will potentially acquire you,' says Brown.
That's particularly significant depending on whether you plan to sell to a trade buyer or private equity. The former is more likely to be looking for a strategic advantage from the acquisition, while the latter is particularly focused on going for growth so they can make money on the sale.
Clean out the skeletons
You need to be ridiculously thorough when it comes to preparing your figures and other documents for the due diligence process. From supplier contracts to health and safety certificates, make sure everything is updated and locked down. Don't give the buyer any excuse to knock money off the sale price.
Keep the engine running
You need to find the time to work on the exit process while also maintaining the momentum of the business. That's no small ask. It might be necessary to bring in or promote a new chief executive to run your company day-to-day while the process is going on. In most cases it's advisable to keep information about the sale on a need-to-know basis, so as not to disrupt the running of the company.
'Before finalising the deal, it should be business as usual for staff, customers and suppliers,' says John Styring, who sold his business, IglooBooks, to Bonnier Publishing for what's thought to have been eight figures last year. 'Any uncertainty can damage business relations and spook the buyer.'
Make sure your head is in the right place
Selling a business you've built can take a big emotional toll, so be sure it's definitely what you want to do. It's worth planning what you will do once the sale is complete ahead of time, especially if you won't be staying on to helm the business for a long time afterward.
'My wife and I have spent 10 years living and breathing the business – it's an emotional process,' says Styring. 'It really is a bit like giving away your baby.'