Well, there’s LOTS to do before you get ready to approach would-be purchasers. First, you’ll want to be very clear on whether the sale will be financial (as in, to a buyer that is solely interested in your businesses’ cash-flow), strategic (as in, to a buyer who expects to combine something you have, with something they have, to produce a “sum greater than the whole of the parts”), or a combination.
Next, you’ll want to do everything possible to maximize the value of your business (whether than means increasing cash-flow, optimizing potential strategic advantages, or both) and the cash-flow multiple that a prospective purchaser is willing to pay. This may involve, for example, improving operational efficiencies, cleaning up any problems that exist, locking up deals with key customers or suppliers or, generally, “putting your house in order.” In short, you don’t want to unnecessarily leave any potential purchaser any excuse to “grind” you on the price or the terms of a sale.
Then, you want to prepare fully for the due diligence process. Specifically, you want to be very clear on all the books, records, contracts, leases, proposals, marketing materials, employment records, etc. that any sophisticated prospective purchaser will want to analyze before making a deal to purchase your business.
Finally, you’re ready to begin approaching prospective purchasers (whether directly or, perhaps, working with investment bankers or business brokers) and negotiating a deal. Ideally, you’d like to create an “auction” environment in which multiple prospective purchasers are bidding against each other. And, of course, you need to be very aware of the fact that the TERMS of a sale are often as important as, if not more important than the price. Those terms might include, for example, any “reps and warranties” you give the buyer and any on-going obligations you have such as “earn out” requirements.
Phew! If it seems like that’s a lot to think about — it IS. That’s why you should contact Strategy That Rocks. We have lead and participated in sales of many, many businesses, we’re experts at that process, and we’re eager to support your efforts in ways that will produce a significant net economic benefit to you.