Logan Chierotti — March 9, 2017 Follow @LoganChierottiSelling your company is never easy, anyone who says otherwise is full of it. I’ve sold 3 of my own companies and been involved in selling 100’s of franchises and other businesses.
Selling a company is an extremely complicated and strenuous process.
As a business owner running the day to day operations of your business is hard enough, when you add in the outside pressure from potential buyers asking for due diligence request upon due diligence request the whole process can be overwhelming. Sophisticated business investors know this process is overwhelming too sellers and will typically try and “wear down” the seller through excessive data requests to get a lower price.
Having three totally different experiences with the sale of my businesses I can say it absolutely helps to have a professional on your side.
When I sold my first company, I frankly had no idea what I was doing. I was calling competitors myself, asking if they wanted to buy my company I didn’t understand how valuations worked or even what a valuation was. This lead me to getting less then I should have, but at the end of the day the deal worked out and moved me into a more profitable business.
When I sold my second company, we were doing around $ 3.5mm a year in revenue we had around 30 employees, it was a bigger company then my first and I was actively involved. Having learned from my first sale I decided it would be prudent to hire a broker. I shopped around for about a week and went with a smaller local business broker. The experience of selling this business was grueling, I was meeting with buyers almost nightly after full days at the office, meeting with potential buyers on the weekends. I was out right drained, and ended up again taking a lower offer then we should have.
Going into the sale of my 3rd company I recognized the importance of having a quality M&A firm representing us. I did my due diligence and hired a respected firm that charged more than a lot of the smaller brokers were charging, but at the end of the day I believe we got more then what we would have had we gone the cheaper route.
What made the 3rd company better than the others?
Qualifying Buyers
This may not sound like a huge deal, but it’s one of the most important aspects of hiring the right M&A firm.
When selling my 3rd business I wasn’t wasting anytime meeting or talking to unqualified buyers. There are a ton of tire kickers out there looking at businesses. If you’re going to hire a broker, they should be weeding through the tire kickers and only arranging meetings for you with seriously interested financially qualified buyers.
Place Your Company in its Best Light
A broker knows what steps you must take to make your business most attractive to potential buyers. A professional team can tell you when, where, and how to list your business for the best chances of selling at your desired price point. Positioning yourself well is vital to the overall success of the sale. A professional understands how to position your company for acquisition. This will likely include tasks such as:
- Cleaning up your financial books
- Organizing documentation of company policies and procedures
- Hiring lawyers and accountants to get your affairs in order
- Investing in systems to track your key metrics
- Assessing your company’s performance within the last few years
- Finding the right niche market
- Making your business transparent to potential buyers
Just as you want to get the best deal for the business you’ve worked hard to grow, your buyers want to feel that they are making a smart, suitable investment. Doing everything in your power to put your company in ideal shape prior to entering the market is the best way to enlist buyer bids. A professional team of brokers can breakdown the list of things to do during preparation to put your business in a prime position to sell. Brokers have in-depth knowledge of the temperature of the current market and know exactly when to list your business for optimal buyer interest.
Make Preparation a Breeze
They reviewed our financials, put together a professional presentation andgot us ready for due diligence.
One of the most important aspects of selling your business is preparation. As soon as you decide that selling is the right move, start planning. It’s never too early to begin. Preparation can help you avoid poor performance in your final years in business – something that can ultimately bring down the value of your company. Your liquidity event should be years in the making, with careful consideration for particular elements of your company’s brand and operations. These considerations include: how you can make your business more attractive to buyers, whether your financial statements are up to date, and what your exit strategy looks like.
During your preparations, learn how to value your business, as this is a complex task that takes ample time and attention. Understanding this process early can help you grasp how much your company is currently worth. Valuation includes looking at your hard assets, your debts, cash flow, comparable companies, and more. The value of your company may change between now and when you actually enter the market. Your projections need to be as accurate as possible. Working with a professional can make the prep process simple, effective, and rewarding in the future.
Sell for the Right Amount
You probably have an idea of what you’d like to get for your company, but you may not know exactly what your company is worth to others or how state and federal laws may impact your sale. A broker is your connection to the trends, fluctuations, and updated legal specs regarding today’s marketplace.
Selling your company through a professional gives you valuable insights into the state of the market, the probability of selling, and the prices businesses in your position are going for. A broker can help you develop accurate expectations of the price of your company from a leveraged vantage point, and give you a better chance of selling at a desirable amount. Remember, an informed seller is a successful seller.
Selling your business is a momentous event that deserves proper planning and attention to detail. You should hire a professional team to handle the array of tasks you will have in hand. From financial planning and accounting to the legalities of a business sale transaction, there are many issues you will need to consider. Don’t let years of hard work go to waste. Give your company the chance it deserves on the marketplace by trusting a professional.
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