Small and middle market business owners may want to sell their companies for a number of different reasons. Maybe they are ready to retire, or perhaps they want to move into an adjacent industry to explore new opportunities. Regardless of why a business owner intends to sell, they typically hope to secure the maximum sales price.
Those who prepare in advance before negotiating with prospective buyers or openly marketing the business for sale may have an easier time optimizing the transaction and protecting themselves from unexpected complications.
How can business owners get their companies ready for sale to a new owner?
Assessing the market
Even well-established and successful companies have to track market demand and competition. The local and national market for the company's niche may have changed substantially since the owner initially started or took control of the business. Reviewing current prospects for the company can make it easier for owners to estimate the future revenue of the company. Although a seller does not typically get paid for potential future revenue, having a strong story line in hand about potential growth can help persuade buyers about the value of the organization.
Preparing key leaders for the transition
When leadership changes at an organization, some of the top performers at the company may decide to look for new employment. They may not want to risk the possibility of the business failing or of the new owner replacing them. While we always recommend caution when discussing a potential sale, it may be essential to tell a few insiders in confidence. Consider implementing agreements to incentivize key workers to remain in their positions through closing or even after the transaction occurs.
Identifying issues that limit company value
Performing an initial business valuation before listing the company could help an owner identify issues that could limit interest in the company or push down the sale price. They can then take appropriate steps to address those concerns. Locking in vendor pricing, settling disputes or pending litigation and even paying off certain financial responsibilities can all increase marketability and pricing. Successfully eliminating sources of liability and factors that reduce the perceived value of the company can drive interest in the organization and help the owners command a more competitive sale price.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
