10 Top Secrets – How do I Sell my Company
How do I Sell my Company
Here are 10 essential things to consider to answer how do I sell my company.
I want to say first though that I have noticed this type of question answered by brokers or business advisors who’s number one incentive are fee’s.
There are some A class brokers and advisors out there, though, at the end of the day, fees rule the world in M&A, however, getting information from buyers themselves, at times give you a better perspective on the question, how do I sell my company.
Check out my post on the 15 amazing steps to sell your business.
How do I Sell my Company Key Line Items
1. Inform all partners or owners
- Informing your business partners is a step that is just based on business ethics and principle. Even if you are the majority shareholder of the business it would be only honest of you to communicate to your fellow owners you’ve been thinking “how do I sell my company” and actually pursuing it.
- This enables issues to get trashed out early and allow the owners/partners to come to a common understanding about the sale of the company before indulging in proceeding.
- Communication and trust is also key and something buyers are going to be looking out for. There would be a significant red flag raised if further into discussions with a buyer, they uncover that you have not been forthcoming with your own partners.
So if your thinking, how do I sell my company and the word gets out that you have been investigating this but didn’t communicate it to your co-owners. I can assure you that there would be a rift in business and relationships.
2. Know your target market
Like anything else that is for sale, your company is no different. You need to know who your target market or best buyers are. Whether that is very narrow, very broad or a mix in between.
There are 4 main classes of buyers. They are the following:
Each type of buyer has different motives and means to acquire a company and when contemplating how do I sell my company, the art of selling is no less important than selling your products or services.
This means from a sales perspective that you must package your company attractively to gain their interest from a buyer. Though it must be done in a customized fashion.
But you must first know who you are talking to and like any good package, you should clearly communicate your intent along with who it is best suited for.
I also know that sometimes it doesn’t matter, but even in those cases its good to communicate that which keeps your pipeline full.
3. Know the value of your company
Understanding how to value your company is a good skill and should be for any owner asking themselves how do I sell my company. Essentially company valuation methods vary and are a bit extensive for this post but some are:
- Discounted Cashflow Method
- Guideline Public Company Method
- Private Company Transaction Method
4. Cleanup your company
I mean this both figuratively and literally. A company that is not neat and organized is going to get looked over or heavily discounted if it is visually unappealing.
It also presents a company that has been cared for with pride over the years.
As for your operations and business practices. These can be cleaned up as well. This can be done through implementing:
- good corporate governance
- good corporate policies
- good processes and procedures
- good departmental internal and external stakeholder retention strategy
These are just some of the standard things that can be done to package your business well in an attractive way.
5. Educate yourself on what buyers look for
- How do I sell my company you ask? Well, for one you are selling something. You must remember that. It baffles me sometimes that business owners would be amazing at selling their products or services and not have a clue as to how to sell their business from a sales perspective.
- Sellers have been deceived into thinking that you are supposed to qualify your buyers first before sharing information about the company.
- Though true to a degree it is significantly flawed from a wholistic point of view. I would like to do another post on this topic entirely, but to keep it short, you don’t want to limit your options out the gate.
If you are in the market to sell, then put on your sales shoes and sell. Don’t fall into the egotistical “I’m to big to speak to everyone who might be willing to buy syndrome”.
There are many subtle buyers out there who can get transactions done quickly but might be thrown off easily by a false bravado.
6. Prepare to be flexible on value
- I know this can be very hard for many business owners, but a lot of work goes into valuing a company other that pulling a number out of a hat based on what another firm sold for.
- You have to understand that no company is the same and the traits of one company may not be the traits of yours. That company would have sold at a particular price for many different reasons which doesn’t correlate to your business.
- Flexibility allows you to have more offers and options on the table that make sense. Allow buyers to have a fair chance at valuing your business by providing them with the financials of the company and details of how you do business.
- Some business owners thinking of how do I sell my company but keeping everything so confidential that information gathering by the buyer is almost impossible would only turn them away ever so quickly, sending them to the next seller who is willing to be transparent and sell the business from a sales perspective.
7. Prepare to stay involved for a transition period
- The transfer of client relationships are key to a successful acquisition post transaction. In most cases buyers want owners to stay on for a defined period of time.
- This allows for them to recruit a qualified replacement and be trained by you the owner, as well as pass on those key customer relationships. This is critical to answering the question of how do I sell my company.
8. Prepare to provide seller finance
- This is a touchy one for a lot of sellers. If you are asking yourself how do I sell my company, then your mind needs to be open.
- Allowing the buyer to make payments directly to you over a defined period of time can make it easier for the buyer to de-risk the transaction, because whether it’s all the buyers funds or funds from a lender, some portion of risk is being mitigated when the seller takes on some of the transactional risk.
- So give this serious thought, it’s a great option that many sellers successfully use, which is just going to make your entire company package much more desirable.
9. Prepare to retain minority equity in the company
- In some cases you may want a second bite of the apple, meaning you may want to get some cash out of your investment into your company by selling only a portion and holding a minority position for a defined period of time.
- This allows you to by paid out for the minority portion at some future date when the share price or company value has increased.
- What this does for the buyer is, further de-risk the use of cash as the main source of consummating the transaction. Again making the acquisition much more attractive.
10. Prepare to do an earn-out
- This option in most cased come into play when the buyer has doubts about some future projections the company has made and to protect themselves from future risk, they will often offer direct payment to the seller post acquisition.
- This would be based on the company performance where the seller stays on and runs the business for the duration of the earn-out period which would be defined.
- There are many ways to implement an earn-out and is a great way to make your company incredibly attractive for sale.
“Also….. Do you have an accounting cloud solution to help you get this done?”
Think about the question you are now asking yourself. How do I sell my company?
You now have 10 Top Secrets answering how do I sell my company, which you won’t find anywhere else.
However, subsequently you won’t find many straight answers to how do I sell my company on the internet, that is truly honest.
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