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How To Sell Your Business Using A Thoughtfully Planned Exit Strategy
Key quote: “Having an experienced professional in your corner will ease the stress and help you feel more confident with the process.”
From Forbes.com
How To Sell Your Business Using A Thoughtfully Planned Exit Strategy
Written by Melissa Houston
Are you a business owner who wonders what you will do with your business when you are ready to move on? You’ve put much love into growing your business, so it seems heartbreaking to just close shop when it’s time. You need to know how to sell your business and consider your exit strategy.
Dana Jacoby has sold her companies not once but twice and has been involved in nearly $2 billion of transactions for other businesses. As the founder of Vector Medical Group, Dana is committed to guiding other business owners and medical practitioners on how to sell their businesses. Dana’s experience and education have made her acutely aware of the process and pitfalls involved in transitioning a proven enterprise into future success.
Dana’s experience includes Fortune 50 healthcare, international medical marketing, and medical practice management. When the Private Equity markets heated up, her physician clients looked to Dana for advice in navigating and negotiating the sophisticated world of finance. Incredibly, Dana has discovered that women-owned businesses face many of the same issues in scaling and selling their companies as did Dana and her physician clients.
Today, Dana is a mentor and coach for business owners, regardless of their chosen industry. Her work guides business owners through the preparation of their business for sale and the strategies to maximize their returns. When learning how to sell your business, you need to understand the legal requirements and financial tactics involved in the sales transaction. Her role as a confidant and advisor is unique in an arena of investments, sales and profits that is often largely transactional and light on relationships.
For a business owner who is considering an exit transition, it is essential to understand the steps to increase the enterprise’s value and position the business to attract well-funded potential buyers.
Positioning the business finances is the first step you can take in preparing your business for sale. Financial buyers pay attention to the numbers in your business, and they will look at the following:
How leveraged is the company?
Buyers will look at the amount of debt your business is carrying, so be sure to manage your debt ratios. Work on those debt levels if the company is over-leveraged (too much debt).
How reliable is cash flow?
Cash flow is the lifeline to any business, so a buyer will want to see a steady amount of cash being infused into the business.
Risk management models
Risk assessment is a large part of managing your business and the finances around your business. Risk management is the process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions.
Based on the company’s financial history, the buyer will want an expert valuation to answer the revenue questions. They will engage legal counsel to help codify the agreement with the business owner. The first step will be a letter of intent, the initial agreement to purchase. Other issues will inevitably arise before the final papers are signed, and the money is transferred. And for those reasons, many business owners engage a professional who can serve as a coach throughout the process.
In my conversations with Dana, she shared some of what she wished she had known before she sold her first business. Here are some of my favorites:
1. Know your numbers or hire someone who does
Business numbers are crucial to the sale of a business. Having your record-keeping in order is a must, as business financials are the first thing potential buyers will want information on. Know your numbers such as revenue growth year over year, your profit margins, customer retention data, to name a few.
If you are uncomfortable with numbers, hire someone who can help you in this department.
2. Get good at telling your story
Your brand story is the marketing tool to sell your business. Having a compelling story that is passionate, authentic, and clear is vital in the sales process. Brand storytelling helps build trust, increase customer loyalty, and inspire engagement.
3. There is strength in asking for help
Selling a business will be an overwhelming undertaking. For most business owners, it is a once-in-a-lifetime experience. Invest in the resources that can help you through this process. It will likely be the difference between an exceptional transaction and a disappointment.
4. Negotiate until you are uncomfortable
First offers are never the best, especially when sitting across the table from an experienced buyer. Negotiate for what you need and ask for what you want. Nobody is looking out for your best interest except you, so get in there and get what the company is worth.
5. Know who is in your corner
Some experts can help you through this process and are worthwhile engaging. Having an experienced professional in your corner will ease the stress and help you feel more confident with the process.
The bottom line is that your business is a financial asset that holds value. Your business generates income for you now, and it can also create an income for you when you sell it. Getting the most significant financial benefit from your business is a purposeful goal.
How that process is handled should never be left to chance. Now is the time – at whatever stage the business finds itself – to begin the conversation, the preparation, and the ultimate future for all involved.
