Deciding to sell your business is a big step for any business owner, but perhaps one they knew they would eventually end up taking. It is both a rewarding and challenging ordeal, not too dissimilar to starting a business, but if it is done right and careful steps are taken, it can be a truly profitable endeavour.
More and more business owners are taking selling their businesses into their own hands; relying on technology and data intelligence to guide them through this task rather than relying solely on experts.
This can be successful, and definitely comes at a lower cost, but there are steps that must be taken to ensure success, as well as understanding exactly what journey you are embarking on.
So let’s start with answering some of the bigger questions and offering some tips.
What is frequently asked by entrepreneurs is:
How long does it take to sell a business?
Although this looks like a simple question it does not have a simple answer.
There is no way to confidently say how long it takes to sell a business. There are many things that can impact the sale, which either speed up the process or drag it out even longer than anticipated. It is dependent on individual circumstances.
Things like the market, the industry, buyer demands, and seller expectations all play a part in influencing how quickly a sale occurs, in a good way or a bad way.
It can also come down to something as arbitrary as luck. For some business owners looking to sell, all elements of the process may align perfectly, resulting in a seamless sale. For others, they may face a plethora of obstacles that no one could have foreseen.
It is impossible to predict what might happen.
How long does it take to sell a small business?
For smaller businesses, it takes approximately 9-12 months from beginning the process to the sale being finalised.
How long do mid to large businesses take to sell?
For businesses in this size range, selling takes longer at 12-18 months from start to finish.
However, bear in mind that neither of these timeframes consider preparation that will certainly need to take place beforehand in order to prepare your business for a valuation and to go to market. This may add a few weeks to a few months to the timeframe.
Do what you can to minimise delays
As you can see, this is a long process that is time-consuming and not easy. Until the buyer has signed a contract, you can never assume the sale. Selling your business can grow complicated as a buyer becomes more deeply involved and assertive in what they want. These negotiations can extend the selling timeframe considerably.
To ensure that the buyer is committed, you should take the time to qualify them and be open to communicating with them about their terms. Finding the balance between being flexible and understanding but also firm on your own needs will create a comfortable environment for a fair deal to emerge.
Be cautious though. Attempting to minimise delays can result in rushing the sale, which is more detrimental than a long timeframe. Don’t rush into agreeing on terms that you may be uncertain about. Maintain your control and only agree to sell if it’s in your best interests.
How do you protect yourself and your business during a sale?
It can be easy to get caught up in the excitement of selling your business, but protecting yourself, staying grounded and being smart are imperative for this taxing process.
There are a couple of ways that you can protect yourself. First, hire a good solicitor to guide you. Yes, you wanted to sell your business independently, but for your own sake, have an expert backing you. You never know when you might need it.
When looking for the perfect solicitor, make sure they have experience in selling businesses and getting the best deals, and also ensure they have a free schedule during the selling timeframe to avoid further delays.
The second way to protect yourself is to keep information about your business confidential. You can guarantee this by organising an NDA (Non-Disclosure Agreement) for your potential buyers to sign. Only when they have signed this form can buyers be privy to more sensitive, private details of your business.
Tip: Don’t get distracted by pre-sale business valuations
When you decide to sell your business, you want to make sure you get the best price you can, so educate yourself on the market value of a business like yours. Often, business owners can become distracted by pre-sale valuations and lose sight of their own business. Don’t let these valuations skew your price expectations and remain composed about your price expectations.
Don’t be fooled, selling a business is hard
Yes, selling your business is probably the right thing to do, but remain grounded and realise that this is a difficult, complex process that requires patience and careful, scrupulous preparation. Put time into preparing, stay aware of the market and don’t rush into any deals, and then all of the hard work will be worth it.
Those are some key concerns and questions that most business owners have before taking the plunge and committing to selling their business. But how exactly can that be done? And how do you ‘scrupulously prepare’ as we just insisted you do?
Check out of tips on how to navigate the selling process and get the best deal:
1. Do pre-sale preparation
There are ways that you can increase your chances of securing a deal and a good price for your business before the selling process begins. If you go to market prematurely without considering changes that may need to happen before your business is saleable you increase the risk of deals collapsing further down the line
Some of the best ways to prepare before your sale are having up to date accounts for your buyer, which you should consider selling at the end of the year. This shows your business is relevant and buzzing with business.
Take the time to offer special training to your management team and gradually pass on more responsibilities to them. This is crucial as it will reduce their dependence on you, allowing them to run the business in your absence.
Do your due diligence and settle any active employee disputes or litigation cases. Tying up loose ends and organising your documents, contracts and legal papers is imperative as issues here could see huge delays in a sale, or even a buyer backing out if your business is overwhelmed with legal issues.
It takes time but is worth it.
Make a claim for entrepreneur’s relief and make sure you have experienced advisors aiding you in how to get the best deal.
2. Create an advert for your business
Give potential buyers an insight into your business with a succinct, one-page advert that includes basic information. You can circulate this on your social networks and to buyers directly to get your sale known.
For this, you should include:
- What your business does
- Where do you operate
- Your differences compared to your competitors, i.e. location, customers, contracts.
- Your potential for growth
- The reason you are selling
- Your business’ financial information, i.e. turnover, GP, EBITDA
- Your contact details. We recommend creating an anonymous email address to keep your identity unknown in the initial stages.
3. Choose the right marketing channels
With any sale comes the necessity for excellent marketing. The more channels that you utilise to connect with prospects and advertise your business, the more likely you are to find a genuine buyer.
To begin your marketing strategy, you need to do market research to deduce who your target audience is and to figure out who is currently interested in buying.
From here, you can tailor your marketing and choose channels based on how your demographic behaves online.
Do some direct prospecting and reach out to potential buyers personally by sending emails, direct messages and attach your business advert.
Invest in Google Ads to target buyers and make your sale known and unavoidable.
4. Qualify your potential buyers
In the early stages of conversing with buyers, you need to qualify them, meaning asking them direct questions to assess whether they meet the requirements to actually buy a business. This is crucial to do in the initial phase, otherwise you could realise deep into the process that your buyer cannot meet your demands. Confirming they have the budget is particularly important.
Contact them with these questions either by email or even better, schedule a call:
- Why do they want to buy your business?
- Where are they based?
- How long have they been looking to buy?
- What are their current circumstances?
- Do they have any experience in your sector?
- Do they have the funding to commit to a purchase?
5. Write a memorandum
Put simply, this is a document that goes into more details about your business and provides an overview that is more in depth than your business advert.
Providing your buyers with this will garner intrigue, especially if you include personal insight into how you would navigate buying the business. This will be a valuable sales tool that is unexpected.
6. Be open to communication with prospective buyers
There will be many times in this process where you will feel frustrated and stressed but try to be patient. Have an open dialogue with your prospective buyers; don’t be afraid to ask questions and communicate about the sale. Building rapport could make securing deals far easier, and tackling niggling issues upfront, like seller inflexibility on price/terms of the sale or a lack of preparation for market vulnerability, means less risk for the deal collapsing later on.
7. Get ready to negotiate
Negotiations are an inevitable part of selling your business as both parties have an agenda and terms in mind that they want confirmed. Although this gets you closer to closing the deal, negotiations can delay the process further.
It is important not to rush this phase, and accept the delays, as agreeing to a term without thinking it through properly could be a mistake.
Keep in mind what you want from the sale throughout the negotiation process, but try and compromise with your buyer and be open to flexibility.
Remind yourself what a good deal looks like to you and if the price you are being offered is acceptable considering the market value.
Also, take a look at the bigger picture and consider if there is more than one interested buyer and adapt your selling strategy to suit that. Perhaps auction your business instead in order to get the best deal.
Finally, think about the implications of halting negotiations with one buyer and saying no. Do you have another buyer interested or will this delay your sale even further?
If time is not on your side, be as open to negotiations as possible to get the sale closed.
8. Provide a ‘Heads of Terms’ document
Once negotiations have been finalised you must confirm the terms of the agreement and the buyer’s decision to proceed. This can be done via a ‘Heads of Terms’ document which outlines the points of the sale. It is not a legally binding document, but offers total clarity on the sale and what has been agreed regarding terms and the final deal.
If you have any remaining questions this is the point to ask them. As this document is not legally binding it can be redrafted and changed still, so raise any issues that may still be present now.
9. The buyer’s due diligence
It makes sense that the buyer will do their due diligence on your business to ensure that everything is in order before committing to purchasing. This is why it is important to do your own due diligence before you take your business to market as we stated in step 1. If the buyer finds issues, this can delay the sale and there is a high risk that they could back out. If you have prepared for this moment in advance, you should see fewer, and maybe no issues arising.
Follow this guide and you can succeed at selling your business without the interference or extra cost of an expert. Adhere to these steps and it can be a smooth process for you.
The key to selling your business is to be patient and prepared. Be ready for any obstacle that may come your way and tackle it head on with good communication. It will be worth it in the end.