How to Sell Your Business:
7 Sell-Side Tips for Every Industry
When contemplating a business sale, focusing on key drivers of value can produce more favorable terms and a higher price. Those include:
- Growth: buyers rarely want to invest in stagnant or declining businesses.
- Earnings: An earnings multiple is almost always the key determinant of value. Selling more and spending less are ultimately the drivers of a higher sale price.
- Technology: The technology your business owns or creates can offer a lot of value, particularly if it’s patented. Speak with an IP attorney to explore whether a patent is an option.
- Other intangible measures: A good partner channel for sales, a hard-to-access market segment, or a unique product can all increase your value. Strategic buyers are especially likely to highly value these factors.
So what if you’ve already optimized these value drivers? Seven simple strategies can help you get the best price for your business:
Carefully time the sale of your business. You want all key value drivers on your side, and heading upward. Consider also the larger market, and your investors’ desire for liquidity. Selling in a low interest rate market can lead to higher values for financial buyers, while a high stock market often fetches a higher price from strategic buyers. When the two forces combine, you may get the highest possible price of all.
Selling a business is a complicated undertaking, and you’ll likely only do it once. A skilled advisor adds significant value, so choose your advisor wisely. Don’t try to manage the many moving parts of a deal by yourself.
Consider a Different Lawyer
Your general counsel may be great at what they do. M&A demands a completely different skill set. Don’t default to a lawyer you know, or the general counsel you employ. Hire a specialist. The other side will have a skilled team of experts. Shouldn’t you?
Plan for Due Diligence
Buyers won’t go in blind. They want to verify what you say. Due diligence can be a long and intensive process. Unpleasant surprises can destroy a deal, and may greatly reduce the value of your business. Preparing now can help you address any issues with your business. Having your paperwork ready now will also shorten the timeline from due diligence to a final sale.
Set Realistic Expectations
You might have big dreams for your business or its sale. But sky-high expectations can come back to haunt you. Set expectations that are realistic and match the demand of the market. A good advisor can assist with comparing a business valuation with the current state of the market. This can ultimately increase the value of your business, and establish trust.
Know the Value of Trust
Your rapport with the buyer may matter more than any other factor. No matter how clear your legal documents are, it’s still possible for either side to harm the other. A good working relationship with someone you like and trust motivates both parties to behave fairly. A buyer may be more willing to offer favorable terms when they trust and like you.
Some things are beyond your control. Deals are filled with highs and lows. Control your emotions, or they will dictate your decisions. Plan what you can. Ask for help from experts. And then get back to the business of running your business. A smooth-running enterprise is always and everywhere the best driver of value. So don’t allow deal preparation to steal your focus.