No matter what business you have, when it comes to selling there are some principles that will enable you to be successful. If you do not have experience in selling a business, then you need to know these principles right from the start. Not abiding by these principals could jeopardize a good sale.
Selling a business is a complex process, but these are the three main principles you need to know:
- Having the right level of confidentiality
- Getting a good advisor you can trust
- Finding the right buyer
We will look at each of these in turn:
It you are thinking about selling a business, of course there are some people you need to be able to confide in. However, it is not advisable to share these thoughts with everyone and there needs to be a clear mark of confidentiality. If it becomes known that you are thinking of selling your business, this can harm it irrevocably. There is a right time and the right people with whom you can entrust the information.
Problems from within:
If you tell your employees from the outset that you are thinking of selling your business, this causes an atmosphere of uncertainty. There will be a tendency to not put so much effort into work and some may start to look for jobs elsewhere. Some of the most talented workers will probably be the first to find opening in other places. Gradually, the business could start to fall apart, just when you want it to be at its best.
Of course there is a point when some employees will need to know what is happening. Otherwise, they will start to suspect something and rumours will abound. These will include those who will be involved in getting documentation prepared for due diligence, for instance. To enable confidentiality to be kept those people can be given an incentive in the case of a successful sale of the company. In this way, they will be working on your side to keep up the morale and being trustworthy in keeping confidentiality.
Problems from without:
On the flip side, it is also important that you keep the sale of your business confidential from those outside the business. As clients and customers begin to hear about the sale they will have less confidence in the business. Competitors, on getting wind of a sale will be ready with their strategies to pick up on the insecurities of your customers. So, this could soon result in a down turn in business.
A Good Advisor you can Trust
There may be many different advisors recommended to you, of all sorts of professional capabilities including lawyers, consultants, auditors and the like. However, when selling a business it is important that you get advice from professionals who have experience in the buying and selling of businesses. M&A advisors know the selling process from start to finish. They will know how to prepare a company for sale, to carry out the negotiations, to handle confidentiality and all the pitfalls to avoid. They will also have access to a network of buyers and know how to find suitable buyers for your business.
It is important that you find a team of advisors that work transparently and whom you can trust. Do your research on the advisors you choose. If possible find others who have had experience using them and look at their success history with businesses similar to yours.
The Right Buyer
The value of a business can vary according to who is buying it. There are various different kinds of buyer, who will be buying for different reasons. A larger corporation may be wanting to buy up the competition to give themselves a bigger share of the market, or a supplier may be wanting to buy a business to have influence over a greater part of the supply chain. Whatever the reason, the importance is to find synergies, where the sum of the two companies together equals more than the sum of the two companies as separate businesses.
M&A advisors are able to look for the right businesses that will benefit from buying your company. They will also have the know-how, to find the right fit. A business should never be sold just to the first buyer who comes along, analysis should be made of all the possible offers.