As a business owner, you need to be prepared when an opportunity presents itself.
The two most common reasons business owners sell are when they:
- Have been approached with an unsolicited offer; and - Have had a serious health scare (heart attack or stroke for example)
In either case, you're not in control of the timing, but you can be in control of how prepared you are when the opportunity or necessity arises.
Whether you want to sell in a year or further down the line, here's a list of 7 things to do immediately to get your business ready to sell:
1. Create a list of 10 companies that may consider buying your business for strategic reasons. Once you have a short list of potential buyers, study their acquisition activity. What kinds and sizes of companies do they buy? Do they list the strategic reasons for their acquisitions? Who leads their acquisition activity?
2. Do business with your strategic buyer list. Once you have your list of potential acquirers, try to do business with as many of them as you can. Companies often buy companies they have worked with previously, so if you can find a way to work with a potential acquirer, either as a partner, supplier or customer, jump at the opportunity.
3. Professionalize your financials - there's nothing that wards off a buyer faster than sloppy books. QuickBooks and Tax Returns for the past several years are the gold standard.
4. Make sure all of your contracts include a "survivor clause" stipulating that the obligations of the contract "survive" any change in ownership of your company. This way, your customers or suppliers can't use the sale of your business to negate the contract.
5. Don't be a salesman. If you're the main salesman in your business, no buyer will purchase your business without a staggering earn-out provision. Make sure to remember that sales people often take time to train and become successful. That being said, now is the time to hire and train good sales people, a few months before the sale.
6. Create a list of a several customers that a buyer could interview. When you sell your business, the buyer will want to speak with your customers; so you will need a group of people that would be willing to say good things about your company. In particular, the buyer will be interested in making sure the customer will keep buying after you leave, so make sure your chosen group of customers is very loyal to you and your business.
7. Protect gross margins. Companies often try to quickly grow their businesses by chasing low-margin opportunities when leading up to the sale. You may think you need revenue growth, but when a buyer sees revenue growth at the expense of gross margin, they will assume your profitability is slipping and may be motivating the sale of the business.