How to Get the Most Value Out of the Sale of Your Business
After spending decades building your business from the ground up, you want to be fairly compensated for the fruits of your labor. However, many Owner Operators are also concerned about how their legacy, their employees, and their customers will be affected after their exit. For this reason, it’s imperative to think critically about your exit plan, and what you want out of a sale.
Here are the three pre-sale considerations every business owner should make to get the most value out of their sale:
Valuation tells a story of the business’ past, present, and future. Unfortunately, sometimes a business’ story falls on deaf ears when buyers do not share the same values and appreciation for your business’ success. In light of this, it's best practice to approach valuation with an objective view, maintaining the perspective of the buyer. Maintaining an objective approach to valuation allows business owners to pre-emptively identify and mend any existing issues that will be brought to the surface during due diligence.
If you receive an offer that falls short on the valuation, this could be an opportunity to think through some of the other advantages of the transaction. This could include providing an optimal environment for your business to thrive or an opportunity for employees to gain knowledge of best industry practices in order to assist with the organic growth of your business.
Effective communication between a seller’s M&A council and the prospective buyer can make all the difference during a transaction. Transparency is critical as it allows the seller to ensure all of their “must haves” are met, and enables the buyer to share the long and short term plans for their business.
With all of your offers on the table, it is time to make a choice. Every acquirer is different and will be able to offer transactions of varying value. The right type of buyer will be the one whose goals align with your own and can mean the difference between long-term sustainability and the fragmentation of your business.
While a private equity firm can deliver a smooth acquisition process and offer the desired liquidity, they may break down and flip your business in 3 to 5 years. Alternatively, a business owner may consider an acquirer who has interest in further scaling the business, and providing their legacy a safe and permanent home. Whatever your goals maybe, it is important to keep in mind that the type of buyer will guide the structure of the acquisition and sale.