Letting go of your business
Cutting the ties with the love of your life, the one who has occupied your thoughts every waking hour and filled your dreams every night for as long as you can remember, is a terrifying thought for most first-time business owners. Selling a business is almost as nightmarish a prospect as losing a family member for some.
Yet you know that a disposal of shares is rightly the ultimate goal and conclusion. Right from the very first stage of setting up or buying a business, the underlying thread to all your strategies should be to position the business for sale. ‘What is going to be most valuable to a potential purchaser?’ is the guiding question.
Understand the value-drivers in your business. Then take the necessary steps to make your business better and more attractive to a business buyer than the competition. Put robust systems and management in place that will facilitate rapid growth.
All the while, think about exactly who might be looking for businesses for sale like yours. Keep a file on potential suitors. When the time comes, this will form an invaluable ‘hot file’ of leads.
Try not to be too sentimental. If the price is right, ‘take the money and run’. Although in practice, you may have to hang a round a while for the best possible price. Many buyers will pay an initial tranche followed by the balance after a transition period, often insisting that the owner is at hand for this time. So you do need to think about whether the relationship is right between you and the buyer of your business, as you may well be working closely together for the period of the transition or earn-out, and a failure in co-operation might have an adverse effect on the final payout figure.
You may also be concerned about the welfare of your staff, and finding a buyer who you can trust in this respect is sometimes more important than scraping an extra hundred thousand out of the deal. You can do your bit beforehand by ensuring key employees have effective contracts with appropriate notice periods in place.
Good advice is to start negotiating with the potential purchaser not as an adversary, but as a friend. Being intransigent over every issue will ultimately be counter-productive and can put the whole transaction in jeopardy. You need to structure a win-win scenario, where everyone is feeling like they are walking away with a good deal.
Remember to demonstrate to the buyer that there is serious growth potential left in the business. Try to put yourself in the buyer’s shoes for a minute and think “where is the upside, what kind of scale is there here, how fast can I grow this business?” Strive to provide the answers to these questions beforehand; you need to offer convincing reasons, not a general comment like “the market is going to be huge in 5 years time”.
The road to a business sale is often fraught with emotional turmoil and anxiety. However the rewards for a properly planned exit always make it worthwhile in the end.
