So You’re Ready to Sell Your Company. Now What?
If you own a business, there will naturally come a time when you’re ready to exit. You’ve weighed your options and have decided selling is the right move for you and the business.
Whatever the reason or circumstances, going from the initial thought (I’m ready to sell) to signing on the dotted line (sold!) can be daunting.
Some owners feel so enmeshed in their business that it’s difficult to separate themselves from it, let alone shop it around. Others are more than ready yet are unable to get their affairs in proper order in time to jump on opportunities.
Below is a summary of the selling process, and what leaders should know at each step.
Consider confidentiality
First, you will need to think about how confidential you want the selling process to be. There are obvious reasons to keep your pending deal under wraps—including preventing team members from jumping ship, so to speak—as well as financial considerations.
A confidential sale is typical as it helps you protect your assets and gain the best possible deal terms.
But in cases where sales are an issue or a quality challenge has presented itself, you can choose not to prioritize confidentiality and instead market the sale widely to ensure the most visibility. This will allow you to gain the most visibility in the shortest period of time and an optimal buyer.
Do proper due diligence
The same way you wouldn’t buy a house without a home inspection, it is expected that a prospective buyer will peek behind the curtain so that they can adequately assess the health and value of your business.
As the seller, you will want to set up a proper system for due diligence, including a due diligence checklist. This will allow the prospective buyer to easily assess the business from all angles, including strategy, financials, revenue breakdowns, expenses, legal considerations, and human capital.
You will want to make all relevant files available in a shared file system, with security and confidentiality systems in place, so that all parties can access the right information in an organized manner.
Possible buyers will typically bring in third-party experts from legal, accounting, IT, and other areas to give their professional opinion on the items being reviewed.
Map out the sale process
If you’re going for the confidentiality route when selling, you will want to create a teaser that explains at a high level the opportunity to the market. This will go out “everywhere” – to investment banks, brokerage firms, outsourced partners, legal firms.
A more in-depth version of this teaser is a confidential information memorandum (CIM) which outlines all relevant company information by department, including sales figures.
From there, you will be able to narrow down the list of interested parties/firms to find the ideal target to buy.
Identify the ideal buyer
It can be daunting to find yourself with multiple potential buyers and no idea how to decide which one to select. Often, the best buyer is simply one that shares company values and culture while offering value to the company.
Transparency is everything; be clear with the buyer about your long-term goals and any potential struggles the company might be facing.
It is also crucial not to determine a buyer based solely off of the monetary compensation; your company is made up of real people, selling real products, and as a business owner you want the buyer to hold genuine interest in the company. Never sell if you find yourself unsure or hesitant.
Decide on the terms
Due diligence is particularly important in this step. Make sure only the right people have access to the terms, and only share as much information as needed to your other employees or partners.
When thinking of the terms of your sale, you may believe your team can do everything all on their own. In reality, this process can take a very long time and have a lot of obstacles to overcome - business development advisors are the perfect partners to help with the terms. They can develop strategic plans to help formulate and negotiate the absolute best terms to sell the company on.
The terms should allow you and your team to benefit from the parent company and their assistance while also not being too restrictive of new ideas. Remember your company’s mission and consider how a new buyer can help!
Close the deal
You made it! Finally, right? Now that you have selected a buyer and agreed upon clear terms, you can begin to close the deal.
Once you have ensured that both teams fully understand and agree to the deal, you will want to continue with effective and clear communication. With your due diligence team, business advisors, and legal team, you can finally sign over your company.
Your deal is now final - you have made the right decision to sell and set your company off on a good foot for future growth!
Surround yourself with the right people
All that said, sometimes management teams find that the selling process takes much longer than anticipated. It also often involves more red tape than imagined.
This is normal. Fortunately, you can surround yourself with the right people and resources to get the deal done with minimal stress (and get the terms you desire in the process).
This includes your accountants, bookkeeper, chief financial officer, board of directors, advisory team, business development team, and more.
Conclusion
While there’s no one-size-fits-all approach, the above tips will help you understand what to expect when selling your business for the best chance at success.
At Sosna + Co, we have helped leaders exit their companies through a well-planned strategy that considers the specific needs of their businesses and industry.
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Sosna + Co is a boutique, outsourced business development partner for the life sciences. From M&A advisory and licensing deals with Fortune 500 companies to uncovering the potential of savvy, new start-ups, the principle is simple: we work meticulously to uncover new opportunities that grow your business. Contact us today to learn more.