5 Golden Rules for Successful Business Sales
Over the years, we’ve helped sell a lot of businesses and learned important lessons in the process – achieving an 80% business sales success rate along the way. In supporting many businesses through the sales process, we’ve distilled key elements which ensure successful business sales: we call them the 5 Golden Rules – and we've shared them below:
Before we get started...
Always be preparing
The first bit of advice we can give is to always be preparing your business for a sale. That means from day one you make sure you’re dotting all the ‘i’s and crossing all the ‘t’s.
Even if your plan is to sell your business in five years, or ten, the earlier you start your preparations, the easier the process will be, and the more appreciative potential buyers will be of your efforts.
Preparation is everything when it comes to selling your business.
1. Research, research, research
We appreciate that no two businesses are alike, and the same principle applies to potential buyers. That’s why our approach to research is based on asking quality questions to yield quality results. We develop a clear understanding of each business seller we work with, combined with our extensive market insights and experience, while keeping the potential buyers’ perspective in mind.
We spend time finding out who your prospective buyers are, what their motivations are and the information they'd like to see from you. That way you're in a much better position to sell the benefits of buying your business.
More time spent doing research ahead of any discussions will stand you in good stead going forward.
2. Get the valuation right
Figuring out a realistic selling price for your business is an important step. It is important to understand buyers’ motivations and what advantages buying your business can bring to them.
To come up with the right business valuation, you need to know how businesses are valued, the multipliers that are often used within your industry, and have a strong understanding of past and present performance, as well as future potential.
Some parts of a business can be more easily valued than others. Tangible assets are much easier than the intangible ones, for examples.
Tangible assets would be things like stock, equipment, premises and land, whereas things like the business’s reputation and the business’s trademarks would be considered intangible.
It’s the intangibles that need to be presented properly to demonstrate their full value in order to get the best outcome on a sale.
Valuation expectations always need to be based on what the business is likely to be worth. They should not be based on personal financial needs or a vanity figure. For many business owners, the purpose of an exit sale is to enable the next phase of their life; failing to sell will postpone your plans indefinitely.
For more advice on getting your business valuation right, click here.
3. Clear heads of terms
It’s important for all parties to clearly determine their objectives for the business to be sold successfully. Our Heads of Terms provide a clear outline for buyers to address the issues that matter to them in the sale of their business and find the right deal structure.
Clarifying the interests of all parties from the outset avoids uncertainty further down the line and helps the sale process to go through as smoothly as possible.
4. Managing the transaction to keep legal costs down
Selling a business can be a costly process - and for business sellers, controlling costs to maximise the sale proceeds is a priority. Legal fees can easily pile up and spin out of control if not carefully managed.
This is where a good business broker shines - keeping legal costs to a minimum with a well-defined transaction process, ensuring that time spent on legal issues is used efficiently and effectively.
5. Maintaining business as usual
Managing the business sales process while maintaining ‘business as usual’ can be taxing on your time and energy. You may have already started envisaging your plans for your life – post sale but in the meantime, the demands of managing staff, dealing with customers and generating revenues still remain.
Prospective buyers don't want to see a dip in the business's performance during the sale process, so it's important to stay on top of things, don't get too distracted and keep pushing the business forward as much as you can until the sale is complete.
Our hands-on approach ensures that we work closely with you, supporting you through the process to help your business sell well.
Finally, a 'Golden Rule' that we stick to for any of our clients is:
We don't waste time with tyre kickers
You know the type: they respond to your ‘car for sale’ ad and arrive looking keen, and full of suspiciously aimless questions. Then they rummage under the bonnet, check the steering and beep the horn a few times before disappearing without a trace, having had no intention to buy in the first place.
We avoid this frustrating outcome by managing initial offers from potential buyers, before arranging for them to meet with you. This ensures that only serious buyers get your time.
Well, we hope that the information above has been useful to you. If you have any questions you'd like to ask us, please use the contact form below or, if you prefer, you can call us on 020 8090 9380. As business brokers with plenty of experience, we're in a great position to help you.