Things to Know Before Selling Your Business (and How We Can Help)
Selling a business is the goal of most business owners at some stage in their career, with the prospect of a comfortable lifestyle thereafter a powerful incentive.
But as business coaches, we at Lesley Jones often see the other side of the coin: business owners who don’t ask themselves the right questions about the sale, about what kind of buyer they’re aiming for, and about the value that kind of buyer is looking for in their purchase.
So, from over 30 years’ experience as professional business coaches helping business owners to get the most from their business sale, we’ve put together this short guide to help you avoid some of the most common pitfalls!
What’s the fit with the buyer?
The buyer will typically be looking to buy a business operating in a sector they already know and understand.
The reason for this is that the process of buying a company is, in itself, often a huge learning curve, but buying a company in a sector they’re not familiar with makes that curve twice as steep.
Ultimately, this could just look like too much complexity and due diligence, to the point where the acquisition no longer seems either viable or attractive.
It’s just one reason why, as any business coach will tell you, studies show that 70% - 90% of business mergers and acquisitions fail!
So, you need to be sure from the start that your business is playing squarely in the buyer’s ballpark, sector-wise – and where the specific opportunity for the buyer is.
Are they looking to your business to expand and round out their offering? Or are they just after your team and your order book? If it is the latter, it could result in them winding the business up after they’ve bought it.
Can the business survive without you?
This is huge. A buyer isn’t buying your business because they need a job, so they’re looking for a company that already has a good, solid management structure in place.
This isn’t just because they need a strong organisational foundation on which to build growth. It’s also because they need to insure themselves against a situation where an experienced and charismatic leader (you!) leaves the company, and the company can no longer run effectively as a result.
It’s absolutely key to selling your business that you can demonstrate to a buyer that you have a competent management and leadership team in place, with robust delegation processes, and a clear succession planning and recruitment strategy to cope after you’re gone.
Probe the buyer’s finances
How the buyer is financing the acquisition is potentially a major risk, so don’t be afraid to ask questions about it, and request evidence of where the funds are coming from. After all, as we explored in a recent post, it can take over two years to properly prepare a business for sale, and that’s a lot of work wasted if the money doesn’t make it to the table.
Are other investors involved? Have they committed in writing to supporting the sale?
If loans are involved, ask your accountant or Finance head whether the buyer’s cash flow forecasts will be able to service the debt once the sale is complete.
In particular, be wary of buyers attempting to fund the acquisition from their own purse. Buying a company is in many ways like buying a house - if you can’t get a mortgage through the official channels, it could be a sign you can’t afford it anyway.
Get professional help
The point about consulting your accountant above speaks to another critical issue: don’t attempt to handle the sale yourself.
As business coaches, we’ve seen many businesses try – and fail. Selling your own business is like marking your own homework: you’re too close to it, and you’ll inevitably skew the outcome.
Instead, engage professionals outside the business – an accountant and a lawyer at the very least – as they can be objective about the financial and administrative realities of the sale.
And remember, an experienced business growth coach who can understand you both as an individual and as a professional - and so map your desired personal and financial outcomes to the sale of the business - will be in a very strong position to advise you strategically on how to sell, and to whom.
Understand the game (and the players)
This brings us to our final piece of advice: be clear on why you’re selling, why the buyer’s buying, and where the common ground is.
It can seem at times like you are at polar opposites, but ultimately - they’re buying to make money and you’re selling to make money.
They’re aiming to create a more secure future that provides security, driven by accomplishment. You’re doing exactly the same thing.
But reminding yourself of this, day to day, through a complex and intensive sale process, can put pressure on your understanding of why and how you’re doing what you’re doing, and what the next steps must be.
And that’s why, as part of our business coach programme, we at Lesley Jones sit down with you from the very start and help show you the way.
To find out more about how we can help prepare your business for sale and maximise its sale price, so you can move to the next chapter of your life and career, get in touch today.