Four 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 four key issues to consider as you begin to plan an exit:

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One: Be clear regarding your goals. As you begin to consider a sale, take the time to clarify and prioritize your personal and financial goals. How do you see your life post-sale? Do your financial goals match the value of your business today? How quickly do you want to close a transaction? Would you like to continue to work for a buyer, after the sale, and if so, for how long? How will you invest the proceeds from the sale? Which of your goals are most important to you? 

Entrepreneurs who bring a level of confidence and self-awareness regarding their goals usually find the process of selling a business much easier than owners who are not clear about their goals or who have underlying or unexpressed concerns about the sale. Advisors often focus on the financial aspect of the transaction, but it’s also important to recognize and address that it also heralds a major personal life change. A document that identifies and prioritizes your goals can help you navigate the process.

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‍Two: Continue to drive revenue. Businesses that are showing growth are more attractive to buyers, and sell for a higher valuation. With a potential sale in mind, it can be tempting to scale back business development efforts, or hold off on exploring new initiatives. Buyers want to know that there are easy and clear ways to continue to build the business, but nothing ensures your transaction will get over the finish line like having a buyer see income increase during the sales process. So this is not the time to take your foot off the gas, but to rally your team to drive business performance, knowing there is light at the end of the tunnel.

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‍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, limited trademarks, high customer acquisition costs, or more. Where possible, try to resolve issues that can be fixed, or when that's not possible, be prepared to address challenges upfront and understand any potential impact on valuation. ‍

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Four: Execute the sale professionally and strategically with a team. Selling a business can be a challenge. But it is still easier than starting, building and successfully running your business. As successful entrepreneur, you know how to navigate uncertainty, and how to identify and hire people who can help you. To sell your business successfully, draw on these traits, educate yourself, and build a team of experienced advisors to sell the business professionally.

In addition to an experienced M&A advisor or investment banker who can guide you through the process (which is what we do here at Hughes Klaiber), you'll also need an attorney who specializes in mergers and acquisitions, and an experienced tax accountant who can advise you on your personal taxes associated with the transaction (we have worked with many great attorneys and accountants and can make introductions if needed.) 

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Executing these four 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.   Schedule a call.  

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