I have previously written about the 3 tasks you need to undertake and be confident about setting up a successful sale of your business. If you haven’t read this, you should take some time to read this now – you will find this article here. Once you get to this stage, that is, you know you are market ready, what you are worth, and who will be the likely buyer. Knowing common mistakes made when selling a business, you are ready to go; you can now start the sale process
Mistake 1 Undressed for the party
The next stage is how you will communicate to the market about how good your business is and why ‘you should buy’! This is where documentation setup is just as important as the business itself. Getting the startup documents into a hygienic state will send a clear message to the market that you are professional, organised, and not to be messed with.
Some of the key documentation you will need include:
- One page teaser about your business
- Non-disclosure/confidentiality agreements
- How the offer or bidding process will work
- Data room preparation
- Financial information
- Lease and licence documentation
- Industry analysis
- Key people
- Customer profiles
With all this is all set, you are ready. Let the sale process begin.
Mistake 2 It’s not only about my business
Once the sale is off and running the fun can start. This is to interact with the market, and listen to their stories and what they have to say about your business. I like to focus on the questions people are asking. What are they asking? How are they asking? What is the order? What seems important to them? Of course, why?
A common mistake here is to think that the buyer is driving this process because you must convince them your business (and in your heart, you) are worth it. This is far from the truth. You have power here. You want to get a handle on the buyer. You want to ask them questions. You need to know who you are dealing with. Here are some of the areas you need to understand about a buyer:
- Financial capacity – do they have the money to buy?
- Financial understanding – do they know what they are looking at?
- Industry knowledge – does the buyer know about the industry, are they a new or an experienced player?
- Culture – does the buyer demonstrate values and culture like yours? I often see vendors agree to a sale simply because a purchaser demonstrates the same values and culture.
- Capacity – does the buyer have the time to invest to make the transaction a success?
Mistake 3 It’s not just about the money, it’s more
Once you narrow the pool of buyers you start the negotiation phase. Negotiation is not just about the money. There is much to discuss in this phase as negotiations are a hugely tactical game. These are the areas negotiations are likely to cover off:
- The sale price.
- The payment structure.
- Non-compete agreements.
- Transitional needs.
- Intellectual property.
- People.
- Contract for sales.
- The closing process.
There is quite a bit in this. If any of these areas are not covered it presents an opportunity for the buyer to pull out of the sale. I have seen plenty of businesses sold to a particular purchaser. I have heard it time and time again, ‘I could have got more money, but this buyer understands what we are doing here’.
Selling your small business is a monumental undertaking that requires careful planning, strategic foresight, and meticulous execution. By understanding the value of your business, developing a robust marketing strategy, and navigating the intricate process of the sale, you can maximise the returns on your investment and pave the way for a smooth transition to retirement.
Remember, the journey doesn’t end with the sale; it marks the beginning of a new chapter filled with opportunities for growth, exploration, and fulfillment. By leveraging the insights and expertise of professionals, embracing change, and staying resilient in the face of challenges, you can embark on this transformative journey with confidence and optimism.
As you prepare to embark on this journey, remember that you’re not just selling a business; you’re unlocking the legacy of your entrepreneurial journey and laying the groundwork for future generations to thrive. So, seize the opportunity, embrace the possibilities, and embark on this exciting adventure with clarity, purpose, and determination.
In the end, the true measure of success lies not just in the value of the deal but in the enduring impact of your entrepreneurial legacy on the world.
Here’s to the next chapter of your journey. Cheers to!
