Seller Preparation
What should you do to prepare to sell your business? Most sellers are not experts in managing M&A transactions. To do so, they invariably take their attention off of the most important task at hand - maintaining the strength of the asset they are selling. To avoid falling into this trap, you need to have a plan and a team to execute the plan. Your plan should take you through the following steps:
- Setting Objectives - You will need to establish up front if you are planning to exit or stay and grow the business. Once that is determined, you should consider the price and structure of a transaction and how much capital you will need for your business objectives and/or owner liquidity.
- Identify the Team - Determine who needs to participate in the process - both internally and externally - to ensure the process moves in a timely fashion but does not take management away from running the business. The team should include your accountant and a transaction attorney - often a different attorney than used for your routine corporate work.
- Identify Valuation Parameters - Look at your financial performance in light of common valuation methods. Determine if you can add more value in the eyes of a buyer and make sure your financials reflect that value by recasting EBITDA.
- Position the Business - Develop a profile of your business that demonstrates your value by highlighting the areas that are of most interest to the types of buyers you want to attract. Customer acquisition and retention capabilities in addition to a strong service delivery model are always of interest to strategic buyers. Financial buyers are looking for the opportunity to reduce costs and achieve significant growth in a particular time period. It is important to understand the financial buyers time horizon, management style and goals to determine if they are a good fit for your business.