10 more tips from business owners that sold their company (Part 2)

If you are a regular reader of our blogs, you will recall Part 1 of this series. Whenever an owner sells their business, we always ask what advice they would they give their peers in a similar position.

Here are tips 11 -20 provided by owners and entrepreneurs across the business spectrum.

  1. Have options on who could buy your business

You need to create choices by having more than one offer on the table. We know, if our clients have attracted multiple interested parties, we are in a much stronger negotiation position. Not only does this provide you with choice, it also creates competition and the opportunity to negotiate an increase in the value of your business. Most importantly potential buyers are less likely to chip away at the price if they know there are other suitors.

  1. Stick to the initial offer, don’t drop and don’t be scared to say no

Most buyers will try to lower the price, especially as you move into the due diligence process. The key to preventing this is to make sure you and your business are well prepared prior to going to the sale stage.  It’s less likely any issues will come out of the woodwork during the due diligence phase and therefore less likely to give the buyer an opportunity to chip.

You need to negotiate hard but fairly and don’t be scared to say no. If you have the options you can do it with confidence.

  1. Make sure your company runs without you

Buyers prefer businesses with strong management teams who can run the business when you are not there. If your business is heavily dependent on you, it will be perceived as a possible risk. It doesn’t necessarily mean you won’t sell it but the buyer may want to tie you in for a long period (which may not be what you want).

  1. Go with your gut feeling

In our experience business owners don’t always accept the highest price, the reason being the structure of the deal may not work for them or the culture in the buyers company could be very different from yours. When you have multiple offers, go with your gut feeling, the deal you feel is right for you and your business.

  1. Buyers want certainty – secure contracts and recurring revenue wherever possible

Establish recurring revenue contracts. Sales drive successful businesses and you should always consider ways to consistently increase these along with revenue, paying special attention to recurring revenue sources that generate gross income for the new owner from day one. Building recurring revenue streams and securing any pending customer or vendor contracts will give buyers added comfort that they will have a consistent flow of future revenues.

Businesses with profitable contracted revenues are highly sought after and can significantly increase the value of your business.

  1. Keep unrelated businesses separate

If you have other interests, unless they are complementary to your core business, keep them separate or you may complicate things and delay your deal. For example, in the past we have seen business owners running their small property portfolios through their business. If I am looking to buy your creative agency I probably don’t want the 2 buy-to-let flats that are currently owned by it.  Keep it simple.

  1. If you feel now is the optimum time to sell – don’t hang about thinking it will get better

Recently, I was listening to an owner who said he wished he had sold 2 years earlier. His business hit a recession and he could see 10s of thousands being wiped off the value of his company every day. Selling businesses is a little like share dealing – some sell too early others sell far too late. The best time to sell a business is when you don’t need to and when you know the potential proceeds will allow you to live a lifestyle that is equivalent or better after you have completed the sale.

  1. Whilst you are selling, run your business like the deal might fall through. It might!

If you have decided to sell your business, it’s likely to be the most valuable asset you own. An alarming statistic is that over 75% of businesses fail to sell at the first attempt using traditional avenues. There are many reasons a sale can fail and it could be as simple as the owners aspirations not being met. In many cases, it’s because the business owners have not prepared properly.

Engage with an experienced broker who can manage and drive the process on your behalf while you keep a close eye on the business. A good broker will be able to minimise the impact the sales process has on you, and the business, and most importantly they won’t take you to market until they are reasonably confident you will sell.

Whatever you do, don’t fall into the trap of taking your eyes off the business. You need to continue running it as you have successfully been doing for years. The better the business performs during the selling process, the more likely you will be in getting it sold.

  1. Preparation is key to success

If you were selling your car, you know that you are likely to sell it quicker and achieve a good price for it if the vehicle is well serviced and valeted beforehand. It is absolutely no different for a business. Preparation is key if you want to maximise value, sell first time and move things quickly.

  1. When you’ve done it, move on and never look back at what might have been. It’s too late to worry about it.

It’s interesting, I know exactly what this owner meant. In the last 13 years, I have delivered seminars to thousands of business owners on how to maximise value when selling a company. Our current seminar is called The Right Way to Prepare and Sell a Business – The Vital Steps in Building Value. Over the years, many owners would address me at the end and say I wish I had attended this event before I sold my first business as I know I would have done things differently.

My response is generally this: if you were happy with the deal when you sold it, focus on that and not what could have been. Remember you can’t change the past, only learn from it, but we can change the future.

We trust you have found these tips helpful.

I would like to take this opportunity to thank those business owners for sharing their insights about what they learnt through the process; and wish them all best in their new life as an owner who sold up.

Wishing you all every success

2018-06-26T15:41:36+00:00By |Sell a business|0 Comments