The decision to sell your company is one of the most important decisions a business owner will ever make. It is an event likely to produce substantial liquid wealth for both the owner and his or her family, as well as a significant lifestyle change. Through more than 60 years of confidential family experience in acquiring and operating businesses, we’ve learned a lot about how to do this right.
Below are some of these lessons.
Know yourself and why you want to sell before reacting to outsiders. Think about why a sale might be appropriate for your circumstances. When you analyze these things and decide the time is right, then move ahead.
You will have moments of regret. That’s natural and does not mean you are not making the right decision. You have spent years building value, business history and tribal lore about your company, so some bittersweet moments are common.
Don’t underestimate the selling process. The process of selling a business, even if reasonably short in timeframe, will be a distraction. This is to be expected and all sellers go through it.
Take care of your people, if they aren’t already shareholders. They helped you build the business and deserve a nice exit bonus for their loyalty. For key managers, a “stay bonus” based upon remaining with the company until the deal closes is also a good idea.
Do advance planning with your tax adviser. What state do you live in? Have you gifted stock to your family? There are significant and meaningful steps that can be taken to minimize the tax impact of these taxes.
Have audited financials, if possible. Three years is an optimal timeframe. Audited financials give a buyer comfort in the numbers, which leads to a better deal for the seller.
Review all aspects of the company to make sure it is “clean.” Environmental, corporate records, retirement plans, HR policies. These things shape the way a buyer looks at the business.
Get data on your markets, competitors and sales by product.
Develop a clear understanding of why your business is successful. What do you do to attack your markets? What lies ahead? Why do customers choose you?
Selection of a “good buyer” is as important as price. You will get your price, most owners have been tracking it for years and have a reasonable sense of what it is worth. But the place where sellers fall down is giving enough importance to selecting a good buyer. Do you want a strategic acquirer or a financial partner? If you plan to stay on, is this the kind of person you could work for?
Study each of these items and think of how they relate to your business. Make notes and then add an 11th item, which is to repeat No. 10. It deserves double emphasis. Review this list again, pick the items you like, combine them with your own business wisdom and we are certain they will help refine your experience as a seller. ●
Ronald E. Weinberg is director and principal and Chip Weinberg is managing director and principal at Weinberg Capital Group
