How to sell a business is one of the most searched terms on the web. There are so many facets to that question, it’s not possible to cover everything in one post. What we can do is explain some basic rules to follow when selling. Follow our guidance to become an exemplary business vendor and get on track to building a great relationship with your buyer.
Rule 1: Provide evidence of a well-run business
No matter how much a buyer loves your brand, product, service, or you as an owner, they won’t agree to buy your business unless there are clear signs that it’s well-managed and operating profitably. You need to give them a reason to buy. This means preparing and collating not just financial data, but customer and supplier records, legal documents, insurance policies, and operational policies and procedures. If you are unable to provide these records to a prospective buyer, it can make them question if the business you’re presenting to them is built on solid foundations.
A well-run business has efficient systems and effective record-keeping. For more guidance in this area, see:
- Is it time to spring clean your business records?
- Elements of a robust financial record-keeping system
Rule 2: Advertise well and widely
You need a clear marketing strategy to get your ideal buyer to notice you. This means creating well-written sales particulars, designing engaging adverts, and choosing the right platforms on which to post them. The more eyes on your advert, the more awareness and interest it will generate.
As business exit consultants, we have access to networks and marketing channels to help vendors reach buyers who already have an interest in acquiring businesses. In a perfect world, you would have several interested buyers, potentially leading to higher offers. For more advice, read:
Rule 3: Plan for every conceivable question and scenario
During due diligence, a buyer and their team can (and will) ask you anything. The process will investigate every aspect of your business, so you should prepare for every eventuality. Knowing your key numbers is crucial, so you can respond quickly and confidently, building a good relationship with your buyer from the start. The process isn’t designed to catch you out, it’s simply there to mitigate risk and protect everyone involved.
A broker or exit consultant can be invaluable in helping you to prepare for this stage of your sale. We use our experience to coach you on the challenges to expect for your type and size of business, and imagine the questions that may come up. Book a free discovery call to find out how we can support you, or read this article for in-depth guidance:
Rule 4: Always vet potential buyers
Scrutiny and due diligence are not reserved purely for you and your business. You have every right to question your buyer, as they do you. It’s important to check that they are a legitimate and able buyer. Always ask for proof of funding or finance, and for character references, perhaps from former owners they have bought businesses from. Useful questions to ask include:
- What’s your previous experience of buying a business?
- Do you have finance/funding in place and ready to go?
- What are your preferred deal payment terms? i.e. will deferred payment terms or earn-outs be involved?
Rule 5: Question your buyer’s values and intentions
Every vendor wants to feel confident their business and employees will be in good hands once the deal has gone through. Establishing shared values is key to feeling this way. Buyer/vendor rapport is a crucial aspect of business sales that can sometimes be overlooked in favour of the biggest offer or the buyer who can act the quickest. In our experience, where positive relationships exist, business sales stay on track, no matter how long they take to finalise.
You should also be clear about your expectations of any future owner, for example, if you would like them to continue an apprenticeship scheme or operate in specific charitable markets. It’s important to check that their intentions are aligned with your wishes. Being upfront in your marketing about the type of buyer you’re looking for should help filter out the best matches.
Two essential questions to ask are:
- How do you intend to run and manage the business going forward?
- Do you have a senior management team you can trust to take over with immediate effect?
Rule 6: Expect the sale to take longer than you anticipated
Quick business sales can happen, but they are rare. Anything and everything can happen when you sell a business, and it’s not for the faint-hearted! Brace yourself for the possibility of extended negotiations and intense scrutiny and try not to schedule too many holidays for the foreseeable. All parties will need you to be available to answer queries promptly. Of course, if you appoint a business exit consultant like us, we should be able to provide at least some of the answers.
The value of a robust exit strategy
We are trusted, reliable exit consultants with experience of selling businesses in your sector. Our aim is always to help you to plan and implement an effective and profitable business exit strategy. Acting as an intermediary we help you prepare to sell, find your ideal buyer and support you through the scrutiny of due diligence and the potential rollercoaster of the sales process. Contact us to find out how we can support you.
