Selling a business is a time-consuming process that requires careful planning and execution. The process can sometimes feel daunting, and the Buyer(s) are going to stress test your business from every angle and require reams of information on every aspect of your company.
Therefore, before you get started on the path of preparing your company for sale, focusing on these three key areas will get you ready for what to expect when you go to market.
1. Why am I Selling
What is motivating you to consider selling your business? Your answer is critical to finding the right type of buyer. Are you looking to retire? Is it a health issue or is the next generation not interested in taking over the business? Is it because the timing is right to cash out or are you looking to take some chips off the table to mitigate risk by diversifying your assets? Answering these questions before you start the process will enable you to find the right buyer, which brings the best overall value and is the right fit for you and your Company.
2. Know your value
Understanding what your company is worth in the current market is critical. You do not want to even start the process without an idea of what your company will sell for in the market. Several factors come into play when valuing a business. These include your company’s current performance, growth prospects, competitive advantages, and market opportunities. Other factors that determine value include customer concentration issues, and how you derive revenues. (I.e., Is it project based or recurring/repeat business) and the strength of your management team. Engaging an experienced M&A Advisor, like Osage, can help guide you through this process so you have a good understanding of what your business will sell for in the current market.
3. Get your Financial House in Order
High quality and accurate financial statements are an essential component of a successful sale. Whether they are CPA prepared or only internally generated, your financial statements and the underlying data are going to be tested, tested, and retested by buyers right up until closing. Therefore, it is essential to deliver timely and accurate numbers from the start of the process to the closing of the transaction. If you have any concerns, Osage recommends that clients consider hiring a Part-time/Fraction CFO to help you prepare your financials or engage an Advisory firm to perform a Quality of Earnings report. These professionals can enhance the credibility of the numbers and identify potential issues prior to starting the process of selling your company.
Focusing on these three key areas before you start the process of selling your company will help you define your exit strategy including the timing of the sale, type of buyer you are looking for and most of all, allowing you to achieve your desired outcome.
Osage Advisors provides a lot of guidance in the M&A market and selling a business here on our blog, on our YouTube channel and Podcast.
