For an entrepreneur, purchasing or sale a business is similar to selling a home. Usually, it will be the biggest and most important purchase they ever make. And before any successful sale of a property, thorough preparation is a crucial stage.
1. Make a plan.
When should you begin making plans for your transition? Never start too soon.
At its most extreme, preparing for a sale might begin as soon as your company is established and a shareholder agreement between firm owners is drafted. Among other things, this agreement may set up the terms of a shareholder business sale (often known as shotgun provisions) to prevent the possibility of a drawn-out and expensive dispute resolution process.
Additionally, bear in mind that if you are in a rush, like in most sale circumstances, you could not get the return you want. Last-minute aesthetic modifications are likely to be detected by buyers. Therefore, be sure to make the essential preparations in advance.
2. Increase the worth of your company.
Many of the actions you must do to maximize the profit from the sale of your firm must be finished far in advance of the deal.
Having a profitable recent history is the greatest method to increase the worth of your company. A marketing strategy aimed at building a varied clientele that brings in recurring business will help you increase your top line revenues. By examining your processes for opportunities for efficiency improvements and building repeatable, transferable methods to increase production, you may increase profitability.
Keep in mind that your capacity to demonstrate profitability is the primary driver of company value.
3. Remain composed.
It's simple to become sentimental when thinking about selling a firm you've worked so hard to build, but now is not the time to allow feelings take precedence over sound financial judgment.
Maintaining composure is crucial throughout family business transitions since you'll need time to resolve interpersonal conflicts, choose successors, and train them to run the company.
4. Arrange your documents.
You must be prepared for any potential buyer to want to do due diligence before buying your company. Financial accounts, minute books, customer and supplier contracts, employment contracts, a thorough list and description of assets, outstanding and contingent obligations, etc. are just a few examples of the documents that must be easily accessible.
You should draft a confidential information memorandum (CIM) that gives prospective purchasers a high-level overview of the company. Also think about establishing an online data room where eligible interested parties may see your due diligence records.
Last but not least, make sure you are prepared and organized. Due diligence may cause a possible purchase to fall through, especially in a buyer's market.
5. Be patient and anticipate delays.
A company selling may be a challenging process. The transaction structure (i.e., an asset sale vs a share sale), determining the value of intangible assets (such as goodwill or intellectual property), or the quantity and kind of finance necessary are all factors that affect how long it takes to execute a sale.