Selling a company is a great way for entrepreneurs to get cash, relax, and take on new projects. But to get the maximum profit and correctly execute a deal, you need to know a few rules. So, this article presents a guide on how to sell your company.
Where to look for a buyer?
Different people buy a business. One wants to invest in a stable company profitably, the second sees prospects and plans to develop the industry, and the third is looking for a “hobby” for his wife. They are not interested in whether you need money to expand another project or you are leaving for an indefinite vacation in Bali. So, offer the buyer what he wants, and you will sell the company quickly and at a good price.
If there is no way you can sell the company on your own, business brokers are a good option.
The guide in selling company: useful tips
We have divided the company’s selling process into several stages and prepared some useful recommendations on how to do it efficiently. So, there is a complete guide:
- Understand what you want
First, you must decide what the owner wants from the transaction. Stay as a manager? Completely leave and forget about the sold business? It depends on the strategy for preparing for the deal. For example, if a company has debts, it is worth finding a partner who can pay them off and then make money for the company.
- Keep silence
The appearance of a rumor that the company is being sold immediately leads to a drop in its value: counterparties fear that everything could go wrong with the new management and the strategy will change. Therefore, it is perceived as a risk. Thus, one of the main conditions for preparing for the sale is that the intention to make a deal must be kept secret.
- Get out of control
If the owner manages the business himself, the company’s value is reduced by 10-20%. Such companies are purchased with the obligatory condition that the owner will remain in operational activity for another three to five years.
- Streamline the legal structure
Often, business is conducted using a large number of legal entities. Therefore, it is necessary to think in advance about its consolidation. A transparent legal structure increases the business’s value and investor confidence in the asset and accelerates the transaction’s closing.
- Draw up a business plan
A smart step would be to provide a potential buyer with a business plan for the development of your company. These should not be just beautiful words but a clear and understandable program of actions based on calculations. This way, you will not only demonstrate the prospects of the business but also reduce the work for the new owner. It will raise the value of the company.
- Make a company presentation to an investor
The package of marketing materials familiar to professional investors includes three main documents:
- A teaser is a short description that outlines the essence of the project and its investment advantages compared to competitors.
- An investment memorandum is a more detailed presentation that outlines the rationale for the theses.
- The financial model is an excel file with the calculation and justification of the business valuation and the forecast of the company’s future cash flows.
- Conduct due diligence in a virtual data room
Due diligence includes checking assets, licenses, contracts with contractors, corporate governance, intellectual property, taxation, reporting, and compliance with antimonopoly laws. Verification must be carried out by the buyer or a third party approved by the parties to the transaction.