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Business Exit Strategy: Preparing to Sell A Business

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As every entrepreneur knows, a great business plan is essential for effectively launching a business.  As the business grows, an effective strategic plan is required to successfully reach the business’s full potential.

But what about planning your exit strategy? 

Far too many business owners do not realize that careful strategic planning to sell your business is just as important as planning to launch and grow your business.

In addition to an independent lifestyle and personal fulfillment, a successful exit is the primary motivator for business ownership and entrepreneurship. 

(Not to mention that a successful exit tends to improve one’s lifestyle and personal fulfillment...)

Because acquisition is the most common exit for an entrepreneur / business owner, here are some tips to better prepare you to sell your business.


Don’t Wait Too Long To Sell

Many business owners wait until the last minute to try and sell their business. They wait until the business is stagnating, or they are exhausted with running the business. In fact, the best time to sell is when business is booming.


But Take Your Time – Don’t Be in Too Much of a Hurry

If you are in too much of a hurry to sell, you will probably leave a lot of money on the table. Buyers – especially sophisticated larger corporations – will likely sense your urgency and will take advantage of it in the negotiation period.


Start the Process Early

It’s a good idea to begin preparing 2-4 years BEFORE the sale. It’s much more expensive and time-consuming to rush and prepare all of the necessary financial and other information in a few months than it is to consistently record and compile records over a period of years. This record-keeping is also important for your business’s growth, since it provides more perspective on your company’s performance.


Get Your House in Order

Make sure that you have been keeping accurate financial records and that your assets are ready for sale.  This includes both tangible assets such as equipment and inventory, as well as intangible assets such as contracts, leases, patents, trademarks, etc.  Make sure that everything is assignable to the buyer and be prepared for extensive due diligence.


Try to See It From the Buyer’s Point of View

A buyer’s motivations are often different than the typical business owner’s. While the entrepreneurial business owner may get excited about innovation and creative strategies, the buyer cares much more about the potential for stable revenue streams and growth potential.  Take time to understand your potential buyer’s point of view, interests, and motivations.


Make Yourself Less Central to the Business’s Success

The buyer wants to buy a business – not you or your job.  From the buyer’s perspective, it’s better if the current owner is not important to the success of the business.  Therefore, in planning for the sale of your business, you should begin training your management team to take over critical business functions.  If all of the key decisions revolve around you (the owner), then the value of the company will be limited without the owner – and therefore, the business is less attractive to a buyer.


Meanwhile, Keep Focused on Running (and Growing) Your Business

When starting the sales process, you must keep a laser-sharp focus on your business’s operations.  It’s important that you do not get too wrapped up in either the sales process or in the romance of any particular sale offer.  As difficult as this is, it’s best to act as if any deal can fall through, even if you are in the final negotiation period, because any deal can come unraveled at the last moment.  Keep your focus on growing your business until the check has cleared and is in the bank. 

In addition, you should do your best to keep the sales process confidential so that you do not endanger relationships with any key clients, employees, or partners whose departure could threaten a transaction or the operations of your business.


Get Professional Assistance

If you are a business owner seeking to sell your business, you can benefit from outside advice and assistance.  As the old saying goes, “The attorney who represents himself has a fool for a client.”  The same applies for a business owner selling without an advisor.  Your advisor will provide you with guidance regarding valuation, due diligence, and the marketing of your business opportunity.  Without a competent advisor, you decrease your chances of selling your business at its maximum price.


Even if a Deal Comes, Be Prepared to Say No

If you have invested a lot of time and energy into the search, negotiation, and due diligence phases, you may be reluctant to reject any deal that comes across the table. However, just because you have a deal in front of you, you do not have to take it.  If the price is not attractive or if the deal is not right for another reason – and it cannot be mended – you may be wise to walk away and consider the next opportunity.

Sometimes, during the process of preparing their business for sale, business owners will find themselves at the helm of a much more profitable, attractive business.  If you have a profitable business, keep in mind that you have other options at your disposable.  In addition to selling your business, you can continue to grow organically, raise growth capital, and/or explore strategic partnerships. 

It’s important to continually evaluate your options throughout all phases of business growth to ensure that you are making the best decisions for the long term.

 

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About Growthink

Founded in 1999, Growthink is a leading middle market investment bank.  Our professional investment bankers have assisted clients in raising more than $1 billion in growth financing, as well as advising on mergers and acquisitions transactions.

 

Need assistance with your business exit strategy? 

 

Looking to sell your business?

  • We have considerable experience advising middle market business owners on the sale of their businesses. Contact Growthink's investment bankers today.

 


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Aubrey Meissenheimer says

I am looking at ways / formulas to value a Business
Posted at 1:46 am
Reg Maple says

Great points, especially regarding the importance of making yourself less "central" to the business! As so many operations begin with just the entrepreneur, or with only a small team, it can be easy to leave too many tasks on one's plate and to forget to properly delegate things we're used to doing for ourselves. Even a small amount of time devoted to planning an exit can help shine some light on the areas of our operations that we can (and will eventually need to) remove ourselves from.
Posted at 9:42 am
Sellmyinventory.com says

If in the event that the economy rears it's ugly head and the market in which to sell your business in it's entirety dissapates,don't despair. Sell the assets for much more than a liquidator will give you by visiting http://www.sellmyinventory.com Have a great day!
Posted at 10:43 pm
Karan Brassen says

This article is has been really helpful. I'm glad that there are a lot options for us small business owners, for ex., I found a site, biztrader.com, they allow you to sell your business for free. Little did I know how important it is to market a business in order to sell it.
Posted at 7:59 pm
Karan Brassen says

This article is has been really helpful. I'm glad that there are a lot options for us small business owners, for ex., I found a site, biztrader.com, they allow you to sell your business for free. Little did I know how important it is to market a business in order to sell it.
Posted at 8:02 pm
KevinT says

Sites like BizAg.com have free business valuation tools that can help you determine a selling price for your business.
Posted at 11:54 pm
Biztrader.com says

I like your quote: Get Your House in Order. You have to be prepared in order to sell your business. Many business owners fear that they won't have the funding to stay in business. I believe that if you are trying to sell your business, now is the perfect time. Biztrader.com, has helped several companies sell their business.
Posted at 2:48 pm
BizAg says

@Aubrey & @Karan - try the free tools at http://BizAg.com to value your business and search businesses for sale.
Posted at 1:40 pm
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Posted at 1:14 am
Penny Stocks says

You give very useful and valuable information's.Give me any idea about the business.
Posted at 7:24 am
hilton says

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Posted at 3:34 pm
hilton says

As Adrian Warner wrote: “Olympic experts regularly tell me that London’s traffic problems are the biggest challenge to organizers of the 2012 Games. London hotels And it’s because of them that London 2012′s plans to move badminton to Wembley’s indoor Arena in order to save money are likely to face some opposition from the international governing body of the sport. It seems that London has a big problem to solve. London hotels We`ll see if the organizers will manage to reduce level of traffic within next 2-3 years.
Posted at 3:38 pm
Jerry Mac says

It is intuitive to sell your business at its peak. Just look at the case of IPOs, owners always choose the time when their business is nearly at peak to initiate a public offer, and the IPO tends to perform worse than the market norm. The question however, is how to conduct business valuations and actually sell your business at the peak moment. That's why it's easier just to sell it when it's booming rather than risking a downfall.
Posted at 4:32 am
Online Surveys says

Valuing a business can be hard. I just sold my business & am looking into others, I found the input from an independant valuer worth the money and more.
Posted at 9:01 pm

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