Five Things to Consider Before You Start the M&A Process

If you are thinking of selling your business – now or sometime in the future – advance planning is key to help clarify your options, increase your valuation, and significantly improve your chances of successfully closing your transaction. Below we’ve outlined five key issues to consider as you begin to plan an exit:

One: Be clear regarding your goals. As you begin to consider a sale, take the time to consider and clarify your personal and financial goals, and educate yourself on the sales process. Why do you really want to sell the business? How do you see your life post-sale? How much money do you need from the sale, and does that realistically match the value of your business today? Entrepreneurs who bring a level of confidence and self-awareness regarding their goals often glide through the sales process. Owners who are not clear about their goals or have underlying or unexpressed concerns about the sale sometimes vacillate, add stress, or take too long to make decisions -- all of which can cause buyers to walk away. Selling a business is a financial and emotional decision. Advisors often focus on the financial aspect of the transaction, but it’s also important to recognize and address the emotional aspects of a sale.  An exit plan that identifies and prioritizes all your options and goals can help you work through these issues.

Two: Continue to drive revenue. As a general rule, businesses that are showing growth are more attractive to buyers, and sell for a higher valuation. Buyers expect the growth to continue, which should generate higher potential future revenue, and drives a willingness to pay more for your business. With a potential sale in mind, it can be tempting to scale back business development efforts or hold off on exploring new opportunities. But it's critical to keep up sales momentum throughout the process to sell your business, and to demonstrate revenue growth up to the point of sale and beyond. This is the time to dig deep, put your foot on the gas, and rally your team to drive business performance, knowing there is light at the end of the tunnel.

Three: Put yourself in a buyer's shoes. As you prepare for a sale, take an honest look at the company and think about the business from the buyer's perspective. What are the key advantages of the business, and what are the key challenges? Almost every business has challenges that could be perceived negatively by a buyer. Some issues could include, for example, customer concentration, poor trademarks, limited recurring revenue, or outdated marketing programs. To the extent possible, try to resolve issues that can be fixed, or when that's not possible, be prepared to address challenges with a buyer.  Our e-book, “Preparing Your Business For Sale,” has a complete list of items to address and consider, download your copy here:

Four: Execute the sale professionally and strategically with a team. Selling a business can be a challenge. But on the other hand, it’s not harder than starting, building and successfully running your business. As successful entrepreneur, you already know how to navigate uncertainty, and how to identify and hire people who can help you. To sell successfully, draw on these traits, educate yourself, and build a team of experienced advisors to sell the business professionally. A team of professionals, including an M&A advisor or investment banker, M&A attorney, and experienced CPA are key in managing the process and reaching a successful conclusion.

Five: Time the sale of the business well. To maximize valuation, the best time to sell is when your business is growing, when the economy is robust, and when you are personally ready for the sale. In a strong economy, buyer demand pushes up overall valuations, and in a downturn, multiples drop and buyers disappear. It can be challenging to determine the best time for a sale, and difficult to consider an exit when the business is on an upswing, but if you are considering a sale and are clear regarding your goals, don’t wait until sales slip or the economy weakens.

Executing some of these five strategies within the context of an exit plan can help drive up the value of your business. If you are considering a sale, please reach out to us. We are available to answer your questions, provide suggestions and help you understand the sales process. Email us or schedule a call.  

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