Imagine you come up dorsum from your almanac trade show, and John Smith, who you lot met at the trade evidence, calls you up to arrange to meet with you the adjacent time he'due south in your city. He'southward a chip cryptic about the reason why, but he'southward a apparent person who runs a solid company, and so you concord to come across with him.

Four weeks subsequently he'south there in your office feeling you lot out about selling him your company.

Would y'all exist ready?

This was exactly the situation one of our business coaching clients institute himself earlier this year.

He had built a peachy company with sales up the by year to just over $14 meg, and now he had this unsolicited offering to buy his company.

Here are xv tips to help yous be improve prepared to exercise the trip the light fantastic of selling your company.

  1. Get signed confidentiality and non-solicitation agreements in place.
    Yous want what you share to stay private. And you don't want your prospective buyer poaching customers or team members.A well drafted non-disclosure agreement (NDA) with a clear provision for non-solicitation of your staff or customers is a central protection you must have earlier you motility by whatsoever generic, early conversations of selling your business concern.
  2. Let the "pre-dance" inform you on what the "main event" volition exist similar.
    If the buyer is hard-nosed but off-white, and e'er well prepared and with solid follow through, that tells you ane thing. If the heir-apparent is flakey and unprepared in the early stages, that tells you something very unlike.Don't allow your excitement and desire to shut a deal (or some inflated number your prospective heir-apparent drops in the early stages of the negotiation) blind you to the character of your buyer. And that character is ofttimes previewed in how they bear in the early stages of the sales process.
  3. Be very intentional about when you tell your team.
    Generally, your CFO will know right away (she'due south no dummy--when you enquire her to prepare all those financials she'll know something is going on--talk to her and ask for her discretion.)Wait until the later on stages to tell your leadership team, ideally you'll even take thought through a style for fundamental team to take fiscal incentives to keep the company performing well through the sale (in fact, near savvy buyers will crave employment contracts with incentives to keep your key staff onboard well past the sale engagement).Probable you'll but tell your whole company after the deal is airtight.
  4. Set upwardly an outside "nervus center" for the due diligence process.
    If you lot are working with an investment banker or reputable business broker this will likely exist an online document vault. (Retrieve tip #1--have a signed NDA first!)
  5. Share the near sensitive data at the very end (unless you know there are "surprises" in which case disclose them appropriately earlier in dance then yous don't waste either party's time.)
    Yes, they signed a NDA, merely they could still hurt you lot with what they learned so only share information technology afterwards they have jumped through all the earlier hurdles or at least enough of them that you know they are a legitimate buyer.
  6. Sympathize that it'south a marathon NOT a sprint.
    It is common for a sales procedure to take months. I've got one client who sold her company for only over $40 1000000 dollars. It took her over 2 years and three attempts to close the deal. Pace yourself. You lot accept to run through the stop, not to the finish line.
  7. Brand sure you keep your eye on RUNNING the business and non on the leave door.
    It'southward a strange dynamic--you emotionally start distancing yourself from your business, almost as if you were in a romantic relationship that you knew yous were about to terminate. But you've got to continue running the business through the endmost because if the sales falls through or stalls, and the trend line drops down, it could literally toll y'all millions of dollars of enterprise value.In my stance, this is the biggest reason why you want a talented broker or investment broker representing you and running the sales process--to exit you focused on running a great company.
  8. Normalize your financials early.
    Talk with your CPA or CFO well-nigh "normalizing" your financials. This means correcting them for strange idiosyncrasies so your heir-apparent sees what they expect. The more you have to "explain abroad" some part of your financials, the more your prospective buyer will offset to question their accurateness (or at least posture that way to negotiate a lower price or another security provision to protect themselves in their purchase.)If you own the building in a separate entity (come across Tip 9 below) then make sure you're paying yourself some reasonable rent and that this shows in your P & L. This also includes things like no longer running your legitimate but excessive owner perks through your company.At the very least, restructure your Chart of Accounts to move these expenses to exist "other" and beneath your operating profit shown on your P & L. This means your $56,000 of pension contributions for y'all and your spouse; your leased sedan; your bi-annual visitor board meeting in Maui expenses; etc.

    Call back, your buyer volition want a full three years of financials, and then start normalizing them now.

  9. Pull real estate separate prior to sale and lease to company in an artillery-length transaction.
    Two reasons to do this. First, you may just have created a style to sell your business, just to still keep an ongoing passive, balance income stream from the lease dorsum from your real estate entity to the purchaser of your concern. 2d, in most cases, you'll exist able to negotiate for a higher full sales price past selling the real estate to your purchaser in a second, dissever transaction.The earlier you pull the real manor into a separate entity the better; it legitimizes the organization (plus, it is good asset protection.)
  10. Beware dramatic margin or key ratio discrepancies on your financials relative to manufacture norms.
    They become read flags. For example, I have a client who runs a very successful professional services firm with a 42% operating profit margin. If he were to sell his company his heir-apparent would likely disbelieve his operating profit margin in its calculation of value since in his industry the norm is 35%, with 40% beingness the exterior "legitimate" maximum. Agreement this doesn't mean he wants to lower his operating profit margin, of grade non. He only understands that if he wants to maximize his value on the sale of his business, increasing his operating profit margin is not the best way. He needs to focus on growing his total sales (and hence increasing operating profit through a larger sales base of operations versus merely through increasing his efficiency in operating his concern.)
  11. Beware allowing any one customer becoming more than x% of your total concern.
    If you have too much concentration in a unmarried customer, a prospective buyer will be nervous. "What if we lose this customer post purchase of the company?"To be articulate, I'yard non suggesting y'all stop selling to this customer, of course not. Instead, look for ways y'all can grow your other customers faster then over time y'all reduce your concentration issue.
  12. Beware of potential "channel partner" or other concentration risks y'all might have. Look at your business organization through the eyes of your potential heir-apparent. What scares you lot well-nigh buying the business? What could go wrong post-buy?For example, one manufacturer who is a business coaching client of ours has a key sales channel partner who is responsible for over lxxx% of his company's sales. A buyer would be nervous about this, after all, what if that relationship soured post sale? That take a chance would trigger the potential buyer to negotiate in ways to lower their risk (e.g. pay yous less, require more of the purchase price to exist paid over time and only upon functioning contingencies of some blazon, etc.)What steps can you lot take today to lower your "concentration" risks tomorrow?
  13. Not all buyers are created equal.
    Sometimes the best offer isn't the highest dollar offer. Factor in the certainty that they will in fact close. This means gauging your prospective heir-apparent's delivery level, capacity to shut (both your negotiating partners authority to decide and chapters to fund the sales), and track tape with yous and with other business organization dealings.Don't be shy about qualifying your prospective buyers advisedly. If you're working with a seasoned business broker or investment banker, this is something she'll do for you.
  14. Know that it's normal to emotionally disassemble from the business as you lot get through this process.
    Make sure you correct for that tendency past keeping your focus on running the concern. You may very well stay as the owner. (Run across Tips vii and 8 above.)
  15. Brand sure yous get all the purchase in and input yous need from your other investors before y'all go to sell so that you take a unified decision making team.
    Keep them informed equally you go. Enlist their aid to find buyers, double check deal points, and be a one-step-removed perspective.

And so there you accept fifteen directives to help you lot more effectively navigate the sale of your visitor. Whether this sale exist in the coming half dozen months or 6 years, you're now armed with 15 primal insights to help you do this dance more gracefully.

One final thought: To maximize sales price (both through increasing your EBITDA and through raising the multiple y'all can command) you've got to find ways to scale your visitor and at the same fourth dimension, lesson its reliance on you lot the owner. If you would like to get the in-depth details of how to do this, then please join me for a special webinar training I'g doing that's coming up very shortly.