Right now, you are having far too much fun running your business to think about selling. But at some point you will be ready for a new adventure. What should you think about now, so you can be prepared when the time comes?

To discuss this topic in detail, I recently spoke with Laurie Wiggins, CEO at Byond, a consulting firm in McLean, Virginia, that helps small and lower mid-market companies successfully navigate the merger and acquisition process.

The biggest takeaway from our conversation: Sellers who prepare ahead of time are the happiest with the results. “Business owners tend to focus on the transaction without considering the preparation required to sell successfully,” says Wiggins. “The amount of preparation they do is the single biggest factor in determining whether the sale is successful and the seller’s goals are achieved.”

To determine those goals, Wiggins encourages her clients to first ask some questions:

  • Your goals: What are your plans after the sale? Do you intend to continue working in the business for a period of time, or are you planning to leave right away? How much do you want to walk away with? What will it take to get your valuation to that point?
  • Your buyer: Would you prefer to sell to employees, a family member, a competitor, a customer, or a partner? What are the implications of selling to that type of buyer?
  • Your employees: The buyer might want to keep the existing team because they know the business and customers. Or they might plan layoffs to reduce duplication of effort, especially of back-office staff. What do the employees want? Some might leave with you; others will be scared about losing their jobs. What kind of retention policies will you want to have in place?
  • Your customers: If your buyer discontinues your products or lays off your employees, how will that impact your customers?
  • Your business entity: Are you attached to your business continuing as a standalone entity, or would it be ok for it to be merged into a larger company?

Be clear in your answers. Even if it doesn’t play out exactly as planned, this exercise will be illuminating.

Start with a Third-Party Assessment

According to Wiggins, you should start the planning process 18 to 24 months before you put your business up for sale.

She says that it’s advisable to have a third-party assessment completed so you can address any gaps or problems before you put your company up for sale, and that having an assessment can increase the value of your business by up to 70%.

“Currently, it’s a seller’s market, so the buyer will likely have to offer a large price to get the seller’s attention before starting negotiations. The key, though, is that buyers don’t actually want to pay that price. They expect to be able to find problems or holes during their due diligence that they can use to lower the price,” she reveals. “But if those issues have been addressed by the seller proactively, they won’t be able to reduce the price, and the seller can walk away with more money in their pocket.”

How Much Is Your Business Really Worth?

Another way to avoid surprise (and potential disappointment) when selling a company is making sure you have an accurate idea of how much your business is worth. “Deciding how much you want to walk away with and figuring out if your business currently is worth that much will help you set realistic expectations,” Wiggins says. “This is your baby; of course you’re going to see it as highly valuable. But what matters the most is what potential buyers think it’s worth.”

Wiggins continues, “There are websites where you can find out the approximate value for mainstreet businesses worth $5 million or less, and you can look at what other people are trying to sell their business for.”

For technology businesses and companies worth over $10 million, there are databases you can subscribe to, like Pitchbook, that will show you analogs to a given business. You can also hire a business valuator who can help you evaluate a fair price for your company. “There are plenty of companies that exist to value other companies. They can be expensive to work with, but they can be incredibly useful to understand the market value of your business,” advises Wiggins.

Prepare to Pitch Your Business

With your assessment and price in hand, and a solid plan to rectify any pre-sale problems, you can start to think about the actual sale — a process that can happen in a number of ways. If you pinpoint who you’re looking to sell to and it’s a familiar competitor, vendor, or current customer, you can simply approach them and pitch the sale.

You can also go through a business advisor or broker who can identify potential buyers for you, including  companies that may not have occurred to you.

No matter the route you take, you’ll have to think about who your buyer is and orient your approach accordingly. You will be preparing teaser sheets that include important information about your business — an overview of the company, a list of products and services, competition, revenue, management team, etc.

“This is why it is so important to think through who you want to sell to,” Wiggins explains. “Your teaser sheet will feature the assets that deliver the greatest value to those buyers.”

What Are Buyers Looking For?

Even if a potential sale is a long way off for you and your business, there are steps you can take now to increase the likelihood of a smooth transaction in the future. To begin with, Wiggins says to “Focus on your company’s visibility and reputation with customers, vendors, and partners — this is what potential buyers look for.”

Sales. “For sales, a buyer wants to see that the sales strategy is realistic with regard to the target markets, for the products and services that are being offered, and is being measured with solid metrics and data,” Wiggins explains. “Do all key departments participate in sales strategy? Everyone needs to be on the same page, including sales, marketing, product development, and customer service.”

From there, they’re going to want to see that the sales strategy has been evaluated routinely throughout the year, and that there is leadership and budget in place to support the changes that accompany a change in management. “Buyers want proof that when conditions change,the business can respond effectively. Does your organization actively monitor market and competitive development? Does the sales plan factor in the cost of acquiring new customers as well as the cost of retaining current customers? If you don’t have these things covered, you should.”

Marketing. “A buyer is going to look closely for a solid plan and strategy that is specific to different units and customer targets, and they want to see that customer target profiles are well understood and characterized,” explains Wiggins. “They want to be sure key marketing and communication channels have been identified and are being used appropriately and effectively. These include physical, virtual, and online presence.”

During due diligence, a buyer will look closely at the company’s online presence. “They will look at the articles that are being written about the company and by the company, as well as pertinent blogs affiliated with the company. They also want to see what the company is doing compared to competitors, in terms of activity, providing valuable information, and total reach for social media.”

Developing a strong social media presence now will help you remain current with your audience, as well as with what your competition is doing and market trends. It also affects your reputation and competitive standing — all things that can have a major impact on the overall health of your business.

“LinkedIn currently has 562 million users and accounts for more than 50% of traffic to B2B websites and blogs, meaning an optimized online brand and reputation most certainly affects any company,” asserts Wiggins.

Three Tips for Sellers

Wiggins offered her three best tips for a business owner who is starting to think about selling:

  1. Be clear about why you are selling and who you want to sell to. It may not work out that way, but it’s good to know where to target your efforts.
  2. Be clear about your goals and what you want to accomplish with regard to yourself, your employees, and your business.
  3. Maximize the value of your business before you start the sales process, so you can maximize your takeaway proceeds.

Selling a business can be a once-in-a-lifetime event, so long-term planning and plenty of preparation is worth the investment. Proper action today will result in more options — and potentially greater value — in the future.

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