Key factors to consider before selling your business!

For most entrepreneurs, there will come a time when it would make sense to consider selling their business. It doesn’t matter whether you’re ready for your next career challenge or approaching retirement; finding a buyer to take charge of the company you’ve built may seem like a very wise endeavor.

Even though you might know it’s the ideal time to sell, that doesn’t mean the decision will be a cakewalk. Not only are there several important factors to consider — the impact on your employees, the strategy of incoming management, the financial arrangement, etc. — but letting go of the business you built from scratch can be very emotional as well.

According to a panel of incredibly successful entrepreneurs, there are some of the most crucial things to consider prior to listing your company for sale.

Let’s have a look at those key factors:

Business Valuation

Assess your business and try to set your business’s realistic value by researching recent comparable Revenue and EBITDA multiples. It greatly assists in obtaining information that is organized, straightforward, easy to interpret, and supports the aims of the sale procedure.

Structure the Sale to Safeguard Your Business

You have to be thoroughly prepared before going to market. Carefully qualify who you get in touch with to manage your sale process, and only pursue acquirers that you believe are worthy and possess the funds to close. As the seller, you must understand what any offer consists of (earn-out, deferred compensation, convertible notes, stock, assets, cash, etc.). An M&A advisor is crucial to negotiating the LOI (Letter of Intent) further maximize your price, terms, and value.

Get to the Offer Stage Rapidly

Whether you are selling or purchasing a business, a well-crafted offer letter in the form of a non-binding LOI is crucial. No one likes putting an enormous amount of resources and effort into a business sale before both parties can agree on an offer that is concise, understandable, clear, and that has a decent chance of closing. This is an imperative factor of the deal, and your team of advisors can benefit in millions by obtaining clarity on the offer upfront.

Stay Prepared For Due Diligence

Try and assess the position of the other party. This is extremely vital in your negotiations with the buyer and successfully completing the intense due diligence procedure. In all scenarios, be prepared for the due diligence procedure by preparing various months before selling to boost the value of your company and improve the possibility of the deal closing. An M&A advisor is incredibly precious not only during the sale process but also while preparing for a sale.

Figure Out Your Role in the Future

Negotiate your compensation and role early on in the process so that you are not profoundly vested in resources and time. Quite often, obtaining companies will push this off until it’s too late for you to come up with a healthy compensation plan. You could easily make a considerable amount of money after the sale, and your engagement in the business for a period is crucial to make the sale happen. This is particularly an essential step where an M&A advisor can conveniently negotiate on your behalf where it will be weird for you to push this factor of the deal on your own.

Keep Hitting Your Forecast Along the Way

Without a doubt, it is incredibly crucial to keep on accomplishing your monthly financial forecast during the sale procedure. Not achieving your profit and sales targets at a critical point in the sale procedure is a common reason for business sales dropping down or floundering. Your business isn’t sold until the closing takes place, and you never want to develop concerns or give your buyer a reason to walk or renegotiate the price.

Keep the Sale Process on Track

The procedure of selling a business can easily eat-up a substantial amount of resources and time, more than you could imagine, eventually leading to high costs and you being distracted from your business. Be very clear and concise early on how the selling procedure should unfold and ensure you are delivering on your side. Follow the timelines and don’t abandon them at any point, no matter what. Set deadlines, as convenient, lock in a target closing date as soon as the due diligence procedure reaches its completion, and ensure the legal documents clearly reflect the LOI you signed upfront.

Assemble a team of advisors as a first step, including an M&A advisor to control and manage the complete sale procedure, a transaction/corporate attorney, and a Tax/CPA advisor. This team would greatly help you with optimizing your sale price, focusing on the net dollars to you after taxes, and significantly increasing your chances of closing a deal.