Thinking about selling your business? From evaluating your company to preparing your financials and meeting with prospective buyers, it's a long and complicated process, so it's important to be prepared.
Chuck Richards, CEO of business evaluation software provider CoreValue, discussed his tips for making sure the transfer process goes smoothly, including what to tell interested buyers and how to determine your business's value.
Before you cross the T's and dot the I's, be sure you check out these do's and don'ts for selling your business.
1. Don't do it yourself. Selling a business is not an easy task – rather, it's a multi-faceted process, Richards said. If you want to do it right, you're going to need help. Richards suggested getting an adviser.
"The assistance of an adviser who is seasoned in the process will help guide you towards maximizing your value, while acting as a line of defense to alert you of any red flags," Richards said.
But working with an adviser who hasn't handled a similar situation before can hurt you more than it can help you. Richards said it's important that your adviser has experience with mergers and acquisitions, knows the accounting side of the transaction, and knows where the opportunities lie to structure the deal favorably. [3 Questions to Ask Before Selling Your Business ]
2. Don't rush through due diligence. Richards advised doing a pre-due diligence assessment to avoid not-so-pleasant surprises during the actual due diligence process.
"This investigation will allow you to view your business through an objective lens," Richards said. "This is the same view potential buyers will have when establishing their purchase value offer."
A pre-due diligence assessment will help keep you on the same page as your buyers, which is always important.
3. Don't hide your weaknesses.Obviously you want to sell your business's strengths, but your weaknesses are important, too. Richards said that potential buyers may see your company as a better fit if they can pair their own strengths to a weakness on your end.
4. Don't skip your story. It's not all about financials, Richards noted. Interested buyers want to know how your business got to where it is now, so be prepared to tell your story. That includes answering questions like "Why did you build the business?" and "What problems were you trying to solve?"
"These stories and others are important to let your potential buyers know why your business is special to you [and your] customers, and why it will be special to them," Richards said.
1. Do know your value. You can't sell anything unless you know what it's worth, especially if you want to attract good buyers. And when it comes to your business, that's especially important.
"Financials only tell half your story," Richards said. "Your operational performance will be what determines if the transfer will be successful under new ownership."
If you have a great understanding of your business's operational performance, you can more effectively communicate its worth to your potential buyers, Richards said.
2. Do match your sale to your plans. Signing the papers isn't the final step, Richards said; the real endgame is what you'll be doing after the deal is done.
So think about it: When you leave this business, what are your future plans? Are you retiring or starting a new business venture? Regardless of your plans, Richards said, make sure that your business sale is aligned and structured to fund your goals.
3. Do talk to your family. Even if your family members aren't formal stakeholders in the company, it's likely they're involved in your business somehow, Richards said. To make sure everyone's on the same page, you need to communicate with them.
"Talking about the reasons for selling, and what you want to achieve for the future, is important to keep the personal side of the sale in line with the business side," Richards said.
4. Do reach out to your peers. If you know other people who have sold their businesses, they could serve as a great resource for you during the transfer process.
"Find out what they would do again, and what they would avoid," Richards said. "Ask what was most important to their buyers, and get a better sense of what you can do to make your business more attractive to [your buyers]."
Originally published on Business News Daily.