A Step-by-Step Guide
A simple step-by-step guide on the complex task of selling your business. From early preparation, to completion – follow our tips for the best advice.
Selling your business requires careful steps and a strategy to be successful. Often, business owners employ a vast array of experts and advisors to aid them in this time-consuming task.
The process can be achieved without the need to employ various other parties to be involved. In fact, nowadays with the growth of technology and the wealth of knowledge that is at our fingertips, as well as AI software to make tasks more efficient, business owners can now take to step and sell by themselves. This removes spending money on unnecessary advisors and being in control of the process.
Below is our guide on how to undertake this mammoth task independently. Closely following these steps will improve your success rate and ensure you do not miss out a crucial stage.
Prepare for your sale
Whether you do preparation or not could be the difference between a smooth, seamless sale and one that takes time with recurring issues. So, go the extra mile and take time preparing – it will benefit you and your selling process in the long-term.
Also, ensure that your timing is right and that you are going to market at an optimal moment. Failing to consider this could make your sale futile and drag out the process.
If you’re wondering what the best ways are to prepare, see our list below:
- Make sure your accounts are up to date and any loose ends are tied up.
- Go through your documents, contracts and legal papers and make sure they are in order – this is normally expected of any good business before entering an agreement.
- Settle disputes that may be ongoing in your business with employees, customers or suppliers.
- Force as much cash into your bottom line.
- Take the time to train management and make them comfortable with their responsibilities in preparation for your departure.
- Get advice from professionals on how to get the best deal
- Research, and prepare your claim for entrepreneur’s relief.
- Work on the appearance of you business – do renovations and increase its saleability.
Don’t stress about pre-sale business valuations
Pre-sale business valuations provide a reference point for business owners to evaluate the price of their business. This can seem like a daunting, nerve-wracking part of the process but be careful not to become distracted. Educating yourself on the market value can prepare you for distorted valuations and give you a thorough understanding of the value of your business.
Advertise your business
If you’re selling your business, then you want to engage and connect with possible buyers. So, as with any product, you need to advertise your business. Do this by creating a concise profile that states the fundamental aspects of your business.
You should include what your business does, where you operate, how you stand out in your industry compared to competitors, growth opportunities, financial information and the reason you are selling.
You want to highlight the basic, important qualities of your business to entice peak people’s interest, leaving them curious for more information.
Most importantly, don’t forget to include your contact details. This is crucial to further a sale.
Do your marketing
As an extension to creating your succinct business advert, you need to engage in an effective marketing strategy and get your sale known to as many buyers as possible. The best way to achieve this is to utilise as many channels as possible. The more you use, the more brand-new prospects will see you.
Different ways to do the best marketing and reach as many people as possible include doing your research online. By simply googling ‘how/where to sell a business’, articles will give advice on how to get the best outreach with your adverts.
Do market research. You need to figure out exactly who potential buyers may be and who are the big names in your industry. Doing this means you can tailor your marketing efforts to suit how these people behave online.
Utilise your business network, particularly via LinkedIn and other social networking sites, and send your business advert to possible buyers directly. This can be time-consuming but personally contacting someone will reflect well on you, and potentially open a conversation.
Go old school and advertise via traditional media in local publications. This will reach buyers who are definitely in your area.
Conversely to your local paper, invest in Google Ads to reach a wider scope of people.
Be confidential
Remaining confidential is key in the selling process and ensuring possible buyers sign a Non-Disclosure Agreement will guarantee this. This is worth taking the time to investigate and organise. Once it is signed, you can begin to feed buyers private information on the sale and your business.
Are the buyers qualified?
You should qualify your buyers in the early stages of the selling process. By asking questions and opening up a dialogue about the direction of the sale, this will allow you to assess whether a buyer is genuine. As a result, no one’s time will be wasted.
Ask questions like:
- What are their motives behind buying a business? And why yours specifically?
- Where are they located?
- How long have they been looking to buy?
- Are they experienced in your industry?
- Do they have the budget to buy at this time?
Email the buyer or organise a call; regardless, this task should be a priority in the initial conversations you and a buyer are having. You will end up on the same page and will have a greater understanding of who you are dealing with.
Provide a memorandum
Buyers may ask for detailed information about your business that are not present in your mini profile advertisement. Prepare a memorandum for this scenario that you can provide immediately, which includes further details on your business.
Having this prepared in advance to send immediately when requested may speed up the selling process, plus your buyers will become more curious and invested in the sale the more they learn about the business.
Communication is key
Although this can be a stressful process, don’t forget that it is simply an arrangement between two or more people, so be patient and make open communication a priority. Without it, unspoken issues can arise like seller inflexibility on the price or sellers failing to prepare for market vulnerability which could lead to buyers cancelling.
Negotiating and Closing
These final stages could make or break the sale, so be prepared for a long negotiation process and asking for the sale.
To keep yourself in control of your sale, bear in mind some questions to constantly ask yourself to prevent irrational decision making or the buyer taking advantage.
Most importantly, make sure you have a good deal or price in mind and you are secure in that. You need to be fully aware if the price you are being offered is acceptable for you, and considering the market value of you business.
Having one party interested is positive, but are there others interested in buying your business also? You can leverage this to your advantage and potentially get an even better deal. If this is the case, consider switching your selling process to an auction.
If there are no other interested parties, will saying no to this one delay the selling process? Can you afford delays or are you confident another buyer will come forward? Remember your time is valuable and starting the selling process from scratch could set you back 9 months.
Try to be as flexible as possible in negotiations as being firm in your original demands may be unrealistic. Continue to openly communicate with your buyer and try to meet a fair resolution. If this is successful you can begin to close the sale.
Provide buyer with a ‘Heads of Terms’ document
A ‘Heads of Terms’ document outlines the sale in full once the negotiations have been agreed. It provides the terms of the sale in full for both the buyer and the seller to avoid confusion. Bear in mind, this document is not legally binding, it simply states what is included in the sale and the deal that has been agreed on.
Although negotiations have technically been agreed, this stage could invite multiple redrafts before an agreement is settled. This is also an appropriate time to ask any remaining questions you might have now.
The buyer’s due diligence
As the buyer commits to buying your business, they will understandably do their due diligence to ascertain whether there are any outstanding issues that need resolving before taking on the responsibility themselves. If you are unprepared for this stage and haven’t personally done your due diligence on your business, this could result in the sale collapsing or negotiations starting up again, so be prepared.
Stay smart and protect yourself
Make sure you have a good solicitor for a large sale such as selling your business who can advise you and help you through the process. Until the buyer has signed on the dotted line and bought your business, anything could go wrong – so protect yourself.
Ensure that the solicitor you hire is capable of this type of service. It is important to ask if they have any prior experience in this area and to provide you with evidence. Also, make sure they are available to commit. This is a long-term process, you do not want delays to occur due to your solicitor having holiday plans.
How long does it take to sell a business?
There is no specific answer to this question. There are so many variables that can impact the process at any stage. All you can do is follow the steps that are outlined above and be as prepared as possible for any curveballs that may appear.
Things like the market, unreliable buyers and the seller’s high expectations can impact the timeframe of the sale. It can also depend on something as precarious and arbitrary as luck. Some sales may occur at exactly the right time, with many financial directors having the budget to buy. For other sales, the timing could be atrocious.
What is the timeframe when selling a small business?
For small businesses, the estimated timeframe for selling is between 9-12 months. Sometimes preparation needs to happen prior to the selling process beginning which could add on an extra few weeks.
What is the timeframe for mid to large businesses?
For larger businesses, the timeframe is slightly longer at approximately 12-18 months (not including prior preparation).
For full disclosure, these timeframes are approximations, and anything can occur during this time that can throw a sale off course. It is imperative to prepare and plan in advance for any issues that may occur, but have an expert advise you on this so as to not waste your time preparing if it is unnecessary.
Spend time on your own due diligence of the business and be thorough before going to market. Also qualify your potential buyers thoroughly so you are certain you are engaging with people who are genuinely interested and capable of committing to a sale.
Remain in control of the sale and don’t rush into it. Although selling your business in a short amount of time may seem like the desirable option, taking the time to think through the demands of the buyer means you can ensure you are getting the best deal.
Although selling a business is an exciting prospect, be under no illusions that it is a long, difficult process that can be stressful and frustrating. Be sure to remain in control, be prepared by following our steps, and find the best buyer possible for you and your business.