Successful entrepreneurs put time, passion, and monetary capital into creating their businesses. Depending on where you are at in your journey, you may have more of one of these resources than another. Many serial entrepreneurs start a business or a side hustle to diversify their income and ensure that they are not over-invested in one industry. This can be a large contributor to why some owners choose to buy rather than build from the ground up. Of course, buying a business can be rewarding in many other ways outside of mere diversification.
Selling a business can be a hard but rewarding experience. Whether you are the founder or a second owner of a business, you have put your time, energy, money, and talent into making the business what it is today! Whenever you start or grow a business you become attached to that business. This attachment usually means you are looking not only to profit off the sale of the business but also want to leave it in good hands.
Whether you have a business you would like to sell, or cash on hand you would like to invest in owning an existing business, here are ten of our top recommendations you consider when engaging in either.
Selling: Take the time to think about why you will be making this transition and what you hope to get out of it
Whether or not you love what you and your business have been doing the last while, there is something that has led you to decide to make transitioning away from your business. Make sure you’ve taken the time to think through what it is and why selling your business is part of what you seek in the future.
Maybe the business has changed as you have grown or maybe you’re no longer as happy running it as you were in the early days. It could be that you feel that someone with different skills could run your business better than you can. Perhaps you are still happy with what you’ve been able to accomplish but have been seeking to get into a new industry.
Once you identify the motivation for selling your business, you can identify what type of buyer you hope to attract. Someone with a certain skill set, someone who can pay you handsomely, or someone who you feel that you can trust. Whatever it is, you need to identify this first, accepting that the answer could be an iterative process as you go forward with the sale.
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Buying: Have a framework for success
Decide what a successful purchase looks like. Is it something you are hoping to operate? Are you looking for a business that will help you diversify? What does the margin of the company need to be for it to be a worthwhile investment for you? Once you have considered what metrics you need to achieve success with a new business, you will have a better idea of what business matches your acquisition metrics.
Selling: Break down everything that is for sell
You need to look at what you are willing to include in the sale and anything you are want to withhold from the sale. It may seem tempting to say it is all for sale, but vagueness and uncertain sale terms can scare off many buyers. Are you selling assets? Are you looking to sell the rights to the name of a business or a product (i.e. trademark rights)? Does the buyer take over certain operating/non-operating debts of the entity? Some acquisitions require the original owner to stay on for a certain period as an employee or consultant to help with the transition. Make sure you have thought out what you would like to include in your offering.
Buying: Read through every part of the listing
Make sure you have thoroughly audited the company. Be sure that what they are offering is consistent with what you decided you are looking to acquire. If something is missing, such as “rights to products and manufacturing processes”, that does not mean you should not talk to them, but you should ask early on why this wasn’t included. Everything from operations to social following should be examined.
Seller: Make sure you have an easy to understand listing for buyers
When a buyer sees your listing through an agent or webpage make sure that it is easy to understand what you have decided to include in the offer. Be specific and concise in the offer. Break things down and split them into categories. Offer metrics that you feel can be used as selling points. Make sure your documents are in order if anything needs to be checked in the process.
Buyer: Make sure you talk it through with the seller
If the business is well taken care of, the seller will know their company better than you do. You should make sure you can learn everything you can from them in negotiations. Be honest with the seller about any hesitations you may have and see if you can negotiate a deal that works for both parties. You may want to have some agreement for the seller to stick around in some capacity to help with the transition. Be sure to also find out why the seller is choosing to find new ownership. There may be a good reason, but it is something you should know. You should also take the time to find out any problems you can solve in the company.
Selling: Let your stakeholders know when the time is right
If you want there to be bad blood during the transition, do not tell anyone when there is a change in management about to take place. Whether you decide to let your employees know after the sale has been made early on, you should make sure that they know what is going to happen and what it will look like as the transition occurs.
It is often best to let customers know as well once the transition period has begun. Letting the customers know is a show of good faith and helps them prepare for any changes that may come with the new ownership.
Buyer: Check everything twice
Before signing any agreements, review everything. Make sure everything is written down and nothing gets left out. If you need to chat with an attorney, do so to make sure the agreements are comprehensive and well-constructed.
Even after the sale is complete, you may want to review your agreement again to make sure it’s fresh on your mind once the transition period begins.
Selling: Do not hesitate to find help
This process might be overwhelming as it is not something many entrepreneurs do often. Many sellers hire professionals to help them with sell for this reason. If you have disorganized books, make sure to chat with your accountant. If you need help deciding what intangibles are being exchanged or understanding the legal side, find an attorney.
Whatever you are struggling with, know that this is a big transaction and should be done right. There is no shame in getting expert help!
Buyers: Make sure you have the support you need for the transition
From operations to relationships, you need to make sure you have a handle on what the new ownership is going to require. If you are keeping employees on, try to meet them and figure out what their needs are. Get to know the customer if you can. If this acquisition is for a merger notify stakeholders, clients, and suppliers to make sure that everyone is ready for the change.
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