Sell to Win
Ten Tips for Getting Top Dollar on Selling Your Business
During December and January, most business owners focus on planning for the upcoming year which makes year-end a good time to consider selling businesses. People sell businesses for many reasons based on business, personal or emotional necessity.
As most owners sell only one company in their lifetime, the sales process is fraught with uncertainty the least of which is divesting a business that represents years of personal effort. Whatever the reason behind the desire to sell, allowing adequate time to plan and prepare will help owners get highest price for their biggest asset their business.
Once the decision has been made to sell the business, Allegiance Capital, an international investment banking firm based in Dallas, offers a ten suggestions for helping business owners achieve a profitable sale and a successful closing:
- Appoint a Team Captain. Sometimes there are multiple owners or decision makers at a company. Empower one trusted individual to be the key spokesperson and decision maker for all negotiations. Centralized decision making instills confidence with potential buyers and helps expedite the sale.
- Assemble a Sales Team. Selling is a specialized process that requires the help of experts such as lawyers, accountants and intermediaries that will help with negotiations and protect the business interests of all parties. Pick seasoned professionals that enable open and candid feedback during all phases of negotiations.
- Know the Company Value. Size up the competition. Maintain internal due diligence on company rivals monitoring for news on similar transactions within the industry. With the help of knowledgeable professionals, the comparable data can be analyzed, and the companys fair market value can be determined.
- Price Fairly. Due diligence will give owners a general idea of company value. Data from recent sales of competing businesses factoring in current market conditions will help owners and their sales advisory team determine a realistic valuation. Typically, purchase values range 10 percent above or below comparable sales figures.
- Prepare for Due Diligence. Buyers will want to conduct a thorough business review. Use the KISS principal in the planning process. Plan well in advance, and assemble all important documents such as lease agreements, property appraisals, equipment lists, corporate minutes, stock certificates, sales representative agreements, bank documents, customer/vendor/employee contracts and other forms of due diligence. Anticipate and allocate time for negotiation meetings, plant tours and company visits.
- Develop a Summary Sales Proposal. Known as an Offering Memorandum, this document declares that the owner is serious about his intent to sell. By stating expectations regarding basic price information and other points of interest the seller helps the potential buyer determine the likelihood of completing the deal.
- Maintain the Business. Just because the company is for sale doesnt mean that work should slacken. Work hard to keep the business thriving during the sales process, because sales price and negotiation power erodes if company profits slip. Take care to clean up and audit the company financials. Continue performing all routine maintenance and keep the business facilities clean and organized.
- Retain Company Leadership. Resist the urge to trim staff to bolster profits. A thinly staffed company with a multi-tasking CEO that also functioned as CFO and head of sales is likely to bring a lower sales price than a company that is fully-staffed. If necessary, negotiate stay agreements with key staff, as most buyers prefer to have a competent management team in place at the time of sale.
- Be Flexible, Patient and Committed. Selling a business is not a simple process. While most businesses sell within six to twelve months, expect the process to take longer than anticipated, and be prepared to address numerous critical issues as the sale progresses. During the negotiation phase, be willing to give as well as take, and keep options open until key goals are met. The best approach for a successful sale is for each side to feel that the transaction was a win-win for both parties.
- Let Experts Negotiate a Prompt Close. Once an agreement is reached, exert every effort to complete the transaction without delay. Deals that stall typically never get completed. Listen to the advice of negotiation experts, and rely upon their skills to close the deal. However, recognize that the final decision to sell rests with the owner.
Often, selling a company can be an emotional and dramatic experience particularly for an owner that has spent many years developing and growing a business. By allowing sufficient time to prepare for and negotiate the sale, owners are in a best position to get a premium price for their business.
About the Author and Allegiance Capital:
Connie Mahmood is a vice president of Allegiance Capital Corporation, a full-service international middle market investment banking firm strategically based in Dallas, Texas. With offices in Dallas, New York, Minneapolis-St. Paul, Minn., Vancouver, British Columbia, Shanghai and Tel Aviv, Allegiance Capital assists companies in all phases of business finance through a worldwide network of investment bankers.