Quantcast
Woman thinking
Entrepreneurs

Are Your Ready to Sell Your Business?

I received a phone call from a colleague wanting to pick my brain about selling her business. I sold my company a couple of years ago and she was interested in learning how I did it. She was in the middle of negotiating the sale of her business.

When we sat down to discuss this, the first thing I asked her was why she wanted to sell.

“My husband and I have a great idea about a new product, and we are ready to get it started. But, I need to divest myself of my current business in order to work on our concept.” She said. “Plus, I’ve been doing this for more than 15 years and it’s just not as challenging. I am bored with it.”

Having gone through the boredom stage myself, I understood how she felt. I asked her if she knew her company’s worth and whether or not the financial end of her deal met the value of her company. She sheepishly looked away and said, “I haven’t valued the company yet. I think I know what it’s worth.”

Trying not to gasp out loud (small exaggeration, here), I asked her how she knew whether the offer presented was equitable. She said she knew approximately what she wanted for the company should she ever sell, and this offer came close. She would stay with the combined company for a few years before completely walking away. The only thing she was a bit uncomfortable with was the salary she would be receiving from the new company. It would be about $50K LESS then she was currently pulling from her own company.

There is so much wrong with this, I didn’t know where to start. She had started her negotiation from a position of weakness, hence she was not in the driver’s seat for any meaningful number – whether salary or stock value. It was my opinion that she needed to take a big fat step back for a few months and start the process again once some fundamental boxes had been checked.

Businesswoman writing on a form

First, she needed to understand the value of her business. Getting the help of a good financial counselor who understands her business category and what is going on in the regional M&A world would be a start.  Not to mention an attorney who could draw up a good employment contract for her. In addition, understanding the culture of the acquiring company and how you – and your staff – gel with them is not to be overlooked.

Selling a business you started fifteen years ago needs to be taken quite seriously. The easy way is to virtually give it away without sound understanding of all the financials and what your company is actually worth. Are you ready to sell your business? Here are some suggested steps:

  • Find out what similar companies like yours have been sold for. Getting to know the M&A people in your business category can help with that insight.
  • Value your company. Understand how buyers evaluate the worth of your business – is it revenue, profit, or growth?
  • What are the terms of the sale? Money up front, earn-out, payment over time? What works for you?
  • If you stay with the acquiring company, what is your job, title, salary, etc.? Since you were in charge before, will you have any say in how the buyer moves the combined company forward?

Selling my company was always in our long-term plan so were sure to value the company each year as part of our annual financial assessment. We also knew what terms we were willing to negotiate and what were our “walk away” points. When it came time to sell, we felt more in control and never felt rushed.

Selling a company takes time and thoughtfulness. Wanting to start a new venture, or feel stuck in a rut can make you feel panicked to want to dump the company you have built to start something new. Take the time to make the most out of your negotiations so that you end up feeling good about the sale.

Did you like this article? Sign up (it's free!) and we'll send you great articles like this every week. Subscribe for free here.

Related Posts

small business owner
Abstract Businesswoman walks Tightrope with Confidence.
unsplash hands researching laptop
Small Business Owner Strategic Solutions
Confidence Code
Best Seller
Personal Branding Feature
best businesses to start
Starting a Food Business
PrimeWomen Award