When you’ve spent years of hard graft building a prosperous company, there’s perhaps no greater accolade than an approach from a fellow entrepreneur keen to buy your business.
For some, thoughts of selling may already have been on the horizon, but others it may have given them food for thought and planted the question in their minds – “well, is now the right time?”
Beware of flattery
It can be very flattering when someone likes what you’ve crafted so much that they’re willing to pay serious money to take the reins. However, while compliments are very welcome, they should always be taken with a pinch of salt because they can pull the wool over your eyes.
With that in mind, if you do decide you’d like to sell your business following a speculative approach, by all means go ahead but keep your wits about you…
If an enquiry to buy a business you own arrives out of the blue, the potential acquirer could well be an unknown entity so do some careful research using trusted networks and contacts who understand the market well.
Sometimes it’s difficult to tell if a prospective buyer genuinely has adequate funds and facilities in place to purchase your business. Seek professional help to determine whether they’re serious or whether they’re just kicking tyres to see under the bonnet of your business.
Being courted by someone who wants to buy your business can be a hugely exciting time, but it’s smart to be vigilant when something as important as your business is at stake.
Have you been approached? Here’s some advice to help you avoid the common pitfalls so you can sell your business with peace of mind – and for maximum value.
- Don’t fall into the trap of being ‘romanced’ and give too much away, too soon. If the acquirer is keen, they’ll remain patient (so going at your own pace might even be a useful litmus test of how genuinely interested they are)
- Work with an experienced adviser from an early stage – because you probably haven’t sold a business before whereas they’ll have the knowledge and impartiality to ‘stand in the gap’ and negotiate the best deal for you
- Get a non-disclosure agreement (NDA) arranged before meeting potential acquirers, to protect confidentiality. Make sure it’s yours, not theirs, and get it signed by both parties
- Carefully prepare an information memorandum – a sales document highlighting the opportunity in more detail, under NDA
- Collate future forecasts to show buyers the scope for business growth over the next 1-3 years but never give the full financials at this stage
- Open the option up to other acquirers – if you decide it’s the right time to sell your business, don’t be afraid to invite additional interest, not just from the buyer you were approached by in the first place. You want to be confident you have got true market value for your business (plus, it gives you a plan B if another interested party drops out of the race)
Selling a business is a complex process, and who buys your business can matter immensely, so it’s a process that must be skilfully driven. After some careful analysis of buyer credentials early on, you’ll be able to progress to the next stage with your chosen acquirer with true confidence. Then, once you’ve negotiated and procured offers and followed due diligence with the help of your corporate finance expert, it’ll be time to secure a deal that meets your exit objectives – leaving you to enjoy the next chapter of your life.
The opinions expressed by third parties are their own are not necessarily shared by St. James’s Place Wealth Management. This article has been provided courtesy of Entrepreneurs Hub (www.entrepreneurshub.co.uk)