I want to sell my business but don't know how
By Simon Rodger
This is a very common question which unfortunately often comes a little later than it should in the life cycle of a typical privately owned business.
Most businesses chug along focussed on the day to day operations and challenges. Some of the better ones think about the longer term growth of the business and plan accordingly. The best ones do these two things AS WELL AS monitoring and tweaking an exit strategy that has been developed at the outset.
It’s understandable that people don’t think about exiting a business when going through the process of setting one up or buying into one, but this is definitely the best time to do so as it can not only add value to your ultimate sale value, but will definitely help avoid painful and stressful issues at a later date.
There are two key components to this planning:
- Personal – having the right investment structure yourself, and appropriate estate planning in the event your business needs to be sold unexpectedly
- Business – have the right structure, agreements and arrangements with any business partners so that exits are smooth and disputes can be minimised. This also includes agreements that govern situations where a business partner is incapacitated or dies
Because circumstances change, it is important to regularly check this exit strategy and associated structures to ensure they are still appropriate. The other critical thing to do during the life of a business is to understand its value and focus on areas that you know will increase its value over time. After all, a smooth exit is not much use if the value is very low. In our experience not enough businesses have a genuine, independent view of their business worth, and this comes back to bite when it’s time to sell.
Finally when it is time to exit, it’s important to treat it like a project. That is, don’t leave value on the table by accepting the first offer or discussing terms before working through structure and strategy. There is more than one way to sell a business, and being able to answer queries from potential buyers and provide them with useful information is very important to generate confidence and increase the size of an offer. In addition to working closely with your business advisor, appropriate legal support is also critical.