9 Steps to sell your business properly
Our 9 step guide for entrepreneurs who are looking to sell their business properly, with top tips on what to look out for along the way.
Deciding to sell your business, something that you have nurtured from the beginning, watched grow, and invested a lot of hard work, money and effort into building, is a huge decision.
By embarking on this new journey, decisions and choices you make should not be done lightly. Your business deserves even more time and effort spent into selling it properly, so you can trust it is being passed into the right hands.
Below, we have collated what we believe to be 9 of the most important steps to adhere to when selling your business. Follow our guide, and you will be prepared for whatever selling scenario may come your way.
1. Prepare to sell – thoroughly.
Do not jump head-first into selling your business without a strategy in place. Being well prepared means that you are ready for whatever may come your way during the selling process.
You need to choose the right time to go to market, otherwise the perfect deal that you are envisioning may never come to light; you may not even get a deal, or risk a potential sale collapsing further down the line.
Below are suggestions on how to organise your business and outstanding responsibilities before your departure:
- Having up to date accounts is appealing for your potential buyer and shows your business is performing, so prepare some.
- Settle legal cases within the company that may be active.
- Increase your management’s responsibilities so they can operate the business without your guidance.
- Claim entrepreneur’s relief and ensure you qualify for it before selling.
- Modernise the physical appearance of the business, from office interiors to your logo.
- Due diligence – the most important thing to do in preparation. It may feel like a long process but getting this done will pay off in the long run.
Top Tip – Don’t stress about pre-sale business valuations
Business owners can become stressed in the selling process with pre-sale business valuations looming; it may confront you with a price you weren’t prepared for or expecting. Try not to get caught up in this distraction and learn the market value for businesses your size and in your industry. This will reassure you on what to expect at this stage.
2. Create a mini business profile
Like with any selling, you need to let consumers know what you’re offering and what’s new on the market. You need to create a buzz surrounding your business sale. Do this by forming a snippet of your business; enough to engage potential buyers but not too much to give anything away.
Some things that you could include are:
- What your business does
- What your role is as business owner
- Business location
- Your characteristics versus your competitors
- Your potential for growth
- The reason you are selling
- The business’ financial information, i.e. turnover, GP, EBITDA
- Your contact details.
3. Marketing
Simply creating a miniature profile to advertise your company will not be enough. You need to thoroughly market your sale and should take advantage of as many marketing channels as you can in order to reach as many prospects as possible.
The best, most common marketing channels you should consider are below:
- Get the word out by speaking to people you already know, like your competitors, people in your network, you customers and your suppliers.
- Do market research so you can tailor your marketing and prospecting to suit those who would actually be interested.
- With your market research, go out and actively prospect potential buyers. Connect with them online and send them your business profile.
- Advertise using Google Ads and tailor the demographic to your target audience.
4. Keep things confidential
Be public about your sale when advertising but keep important details confidential. Do this by organising an Non-Disclosure Agreement for each possible buyer to sign before divulging private information. Genuine customers will have no issue with this.
Top Tip – Communicate openly with prospective buyers
Communication is key in a sale of this scale, so don’t become dehumanised and allow negative emotions to prevail. Think of your buyer as a business partner and treat them with openness and respect, even when the selling process gets hard. A greater relationship with your buyer can pay dividends in the long run if issues begin to occur.
5. Qualify interested buyers
Figure out early on if the buyers that you have engaged with and who have expressed interest in your business are eligible to go ahead with the sale. Provide them with your business profile and ask them questions to decide whether they meet your requirements. You can qualify them via email or, even better, organise a phone call, which is more personable and will help build rapport with future buyers.
Some questions you can ask are:
- Why do they want to buy your business?
- Where are they based?
- How long have they been looking to buy?
- What are their current circumstances?
- Do they have any experience in your sector?
- Do they have the funding for this purchase?
6. Prepare a memorandum
Once a prospective buyer has signed your NDA, you can provide them with a memorandum (a written message in a business) with information about your business in greater detail. This will give buyers a better overview of what taking over your business will entail.
7. Prepare for negotiations
Unfortunately, negotiations are inevitable when selling your business. It is not as simple a purchase as buying new shoes. The buyer is investing in a company that has potential to grow or may collapse and fail under new leadership. The commitment and sacrifice is far greater than a pair of shoes. Because of this, the buyer will want the best deal and may have certain demands.
Be ready for this eventuality, and keep in mind answers to the following questions to avoid getting derailed:
- What is a good deal and/or price for your business?
- Is the price being offered something you can accept? Is it justified?
- Is this the only buyer interested or are there others?
- If there is more than one can you auction your business instead?
- Is saying no to this buyer worth the time it has taken to get to this stage?
- Is the time it’ll take to find another buyer worth it?
It is at this stage where remembering to communicate openly is most necessary. Try to be flexible but also keep your integrity and stay true what is the best deal for you and your business.
Top Tip – Brace yourself for the buyer’s due diligence
Although you performed your own due diligence on the business in step 1, your buyer will almost certainly do their own. In their defence, it is smart for them to thoroughly vet your business before committing to take it on. They only have your word that everything is in place with no issues.
Avoiding doing proper due diligence at the start could result in your buyer finding problems and backing out of the deal. So take the time to investigate your company, and make the effort to put issues right if they arise.
8. Have a ‘Heads of Terms’ document prepared
A ‘Heads of Term’ document outlines the terms of the sale and is produced when negotiations have ceased and been agreed. This is not a legally binding document but provides confirmation for you and the buyer on what has been officially agreed upon. Be cautious that new negotiations and redrafts may occur after seeing the sale in writing.
9. Protect yourself and your business
Invest in a good solicitor for a large sale like this who can advise you along the way. This will protect you and your business during negotiations and against disingenuous buyers.
To find the best solicitor for the job, make sure to ask him these questions:
- Do they have experience selling businesses?
- Are they available during the timeframe in which the selling process will occur (hiring a solicitor who is sporadically unavailable could delay the sale).
How long will it take to sell my business?
Many things can impact the length of time it takes to sell a business. Because of this, there is no specific amount of time that it takes. Instead, it depends on numerous elements, like the market, the state of the business, timing, seller expectations, lack of eligible buyers, and of course luck plays a role. These variables reiterate the importance of preparing properly before beginning the sales process for your business. Plus, you need to be fanatical about analysing the market and being certain about the correct, most profitable time to take your business to market.
What is the difference in timeframe between selling a small business and mid to large range businesses?
For small businesses, the process from start to finish takes between 9-12 months, and that does not include preparation that may need to take place beforehand.
Mid to large sized businesses take longer at 12-18 months, also not including pre-sale preparation.
These are only estimations which can be impacted by the smallest issues going awry. Selling a business is not all smooth sailing, therefore be realistic about the time you are able and willing to give to the process.
To minimise delays as much as possible, take care of small problems that could be a hassle to sort later. Do you due diligence, prepare sales documents like your mini business profile, NDAs and memorandums, and most importantly, qualify your prospective buyers; engaging with someone who is ineligible to purchase is simply a waste of time.
Keep calm and carry on
Remember that it is your choice to sell your business, but you are not required to sell it as soon as a buyer emerges. If it is not the right deal for you and their demands mean sacrificing too much, then hold off until the right buyer comes along. There is no rush. And remember:
Selling a business is hard
It is a complex, frustrating and stressful process, but maintaining a good attitude and remembering what you want out of a deal will make it worth it in the end.