10 Crucial Business Sale Steps

10 Crucial Business Sale Steps

As a small or medium-sized business owner, you're used to answering questions. It can be unsettling to start selling your business without a plan. We've prepared 10 essential steps for selling a business to help you plan and move forward with confidence.

1. Gather Your Advisors

Selling your business has many aspects, and no two transactions are the same, but you will need a trustworthy team of advisors. You, any co-owners, your board of directors (if applicable), your business attorney, and your accountant will be needed in the beginning. M&A advisors, business brokers, and commercial real estate agents may join your advisory team later.

2. Accurately Value

For three reasons, you should know your company's value before proceeding. First, knowing your company's current value helps set reasonable sale expectations. Second, this valuation will be your starting point when approaching buyers. Third, if the valuation is significantly lower than planned, you can delay going to market for 6-12 months to "enhance your worth" (see step 5).

3. Plan Your Exit

An exit strategy doesn't address what you'll do after selling the business. It's about planning your exit in a way that promotes your company's future. Talk to your advisors about why you're selling the business to set goals and prepare a smooth transition.

Exit strategy determines selling structure. Sell shares or sell assets? Do you prefer financial or strategic purchasers or employee buyouts? Discuss your choices with your business lawyer or corporate counsel.

4. Clean Your Finances

Most business owners tailor their financials for tax purposes, not selling the business. New goals await you on your new journey. Your financials should show how historical performance supports future expectations. Organizing your financials and developing a presentation plan might influence purchasers' opinions of your organization.

5. Add Value

If your company's valuation is lower than expected, examine measures to boost it. This does not mean "cooking the books" or overvaluing it. This involves reducing operational expenses, increasing sales, and maximizing profits. Drop your worst-performing, lowest-margin items or services. You might reduce customer concentration. Many methods exist.

Due Diligence

The buyer must perform due diligence (aka comprehensive research into your assets, liabilities, and operations). As a seller, you should prepare by organizing financials, customer data, leases and real estate, intellectual property, debts and liabilities, contracts, and more. Review and amend your records with your M&A counsel and accounting staff.

7. Engage Buyers

Targeting potential buyers—the most time-consuming part of selling your business—requires finding people who want and can afford it. You may decide to hire a business broker or M&A advisor during this stage.

8. Present Correct Contracts

As with every company agreement, the sale procedure requires legal contracts. Your legal advisor should create the IOI, LOI, and Purchase Agreement when selling your business. These documents safeguard both parties throughout the deal. Your business transaction attorney can also give NDAs and non-compete agreements.

9. Negotiate

Business sales have more factors than real estate sales. An experienced business lawyer can help you negotiate stock sale vs. asset sale, liabilities the buyer will assume, assets you'll retain, employment contracts, equity ownership, etc.

10. Transition

If you want the business to survive after the sale, you won't just hand over the keys. You'll introduce staff, key clients, and vendors, train them on operations, answer queries about copyrights, trademarks, and other private information, and more during the transition period.

Ready to Start Selling Your Business? Discuss Starting.