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Selling Your Business : It’s Nothing Personal

The thoughts of Richard Osborne on many subjects over the years.

Selling Your Business : It’s Nothing Personal

I’ve sold a handful of small businesses over the years and spoken with a few people who have done the same, or people who wish to. So I would like to share with you a few key things I’ve picked up along the way to help you through the process, should you be lucky enough to be in a position to sell your business.

It’s Nothing Personal
As the title of this post suggests, the most important thing to remember is that it’s nothing personal. The buyers solicitors are, without exception, going to try and make you look like a liar, they are going to try and twist every little thing they may find or that you may say, and use that to try and drive down the price for their client. It’s their job and it’s nothing personal, so just accept it and keep calm and professional at all times. The moment you lose your cool you lose control.
This also goes for the buyer too, they are looking for a good deal, a bargain. They are buying an asset which they will want to make money from, so they are simply negotiating. So with every negotiation if you are prepared and know what to expect, when it happens you are not surprised and you don’t take it personally. You may have worked on building your business for years and years, but that is all history and it’s doesn’t matter. All that matters know us what your business is now, and it is only worth what someone is willing to pay for it. No-one really cares what you think your business is worth, if no one is willing to pay that price for it then it really isn’t worth it. This is business.

Prepare To Sell
This may sound obvious, but prepare your business for sale. If there are any potential skeletons in the closet don’t hide from them, deal with them. If the business needs you, restructure it so it doesn’t need you. You need to be surplus to requirements, and if there are any unhappy customers to other issues face them head on and make them happy or the situation resolved.
Also, prove how profitable the business can be without you. Don’t waste money on things not absolutely necessary, and if there are staff which need to be included in the sale make sure they are happy and in place, and on board with any sale which you might be planning. If the staff are not included in the sale, then again ensure they support you in your plans. Perhaps have in place alternative arrangements in place to look after them (other jobs, share options, etc)

Plan Your Buyers
Like with any product you wish to sell, you need to know your target market. So research to find who your ideal buyers would be, and why would they be your ideal buyers. Why would they want to buy your business, and how much would your business be worth to them. Gone are the days of crazy multiple markups on turnover, be realistic on a markup on net profit.
Start courting your potential buyers, if you don’t already have a relationship with them start creating one. Work with them on joint projects, or if they are competitors (competitors can often make very good acquirers) start sending them lots of work which you cannot fulfil, showing them your business is a good source of revenue for them.
This process can take a year or more in the planning, but once you have created that relationship then maintain it, but not with just one company but several. Remember nothing like a bit of competition to create demand and drive a better price, because as much as they will be looking for a good deal so are you. Remember this is nothing personal, it’s business.

Prepare For Due Diligence
I touched on this a moment account about skeletons in the closet, but in basic terms a solicitor is going to turn your business upside down looking for any chinks in your armour. An accountant is going to scrutinise your company accountants looking for anything to question, anything which could be not quite right. They are both doing their job, so you need to prepare for this. The main parts are to prepare your contracts with everyone from suppliers to customers and ensure they are in order, ensure all staff contracts are in order, and ensure all your accounts are up to date and accurate. Furthermore, you can help yourself by preparing some key documents;
Prepare a key facts document which will include headline information of all financial and business information for past 3 years. This will be typical management information on your accountants, customers and any contracts you have in place with outside parties. Also include any pipeline opportunities being worked on, with realistic percentages of coming off. Perhaps breakdowns of where the business income originates from, for example of 80% of your business comes from Google SEO rankings, as some buyers may see that as an opportunity or others may see it as high risk. You need to put that sort of information up front rather than be embarrassed and put you on the back foot when it comes out during due diligence.

Put Up The For Sale Sign
When all your homework is done, when you have your potential buyers interested, and you have your business prepared, you need to put up the sign. Now there are several ways to do this, such as getting an independent accountant to send out letters to prospective buyers in private, or engaging an agent, but I prefer the full on frank chat approach. Nothing beats sitting down over a beer or coffee with a potential buyer and laying your cards on the table and asking them outright “I’m looking for an exit and I’ve got a couple of people interested, I’m looking for the best price, are you interested in putting an offer forward?”
Plant the seeds, have the conversations, and then start the game of poker. Keep calm but not arrogant, remember you do actually want to sell. Just like in an eBay auction have your target price and minimum price in mind, be prepared to give a little but remember if it reaches the point of not worth selling be prepared to walk away if the deal isn’t right.
You will be expected to sign warranties, you will be expected to support a hand over, you may well also be expected to work for the business for a few months or years, be prepared and expect these things.

If you keep your calm, if you negotiate well, and if you prepare well, once it is all done and dusted enjoy the fruits of your work and your windfall.
Then it all starts again with your next business 🙂