As an entrepreneur or a business owner, you put substantial effort in building a great business. After many years of successfully running and growing your business, you may think that it’s time to sell your business or be acquired or get a strategic investment. This may more than compensate for all your hard work, if you manage to get the right value for your business. In fact, for many business owners, selling the business may become the highlight of their professional achievements. But how do you manage to do that. Is selling your business really easy? The answer is hell NO. It’s not only complicated but sometimes quite stressful as the process of selling a business is quite complex. Now, before you jump into business valuation and deal structuring, you need to evaluate whether your business is really “sellable” or “fundable”. Sometimes it may take 6 to 12 months to just prepare your profitable and growing business for a strategic sale.

Here are a few steps you need to take even before you engage with potential buyers:

1. Start preparing documents: A clean and organised paperwork will create the right first impression about your business in the mind of your buyer. Prospective buyers expect transparency and right corporate governance practices. So, while you are preparing financial documents like last 3 year’s P&L Statements & Balance Sheets, Tax Returns, Customer Data, Supplier & Vendor Contracts, Projected Sales & Cash Flow Statement, Valuation Report, etc., you also need to ensure that all the legal compliance are in place. You may rope in a reputed firm to conduct a financial & legal due diligence, so that there are no surprises when the buyer is conducting financial, legal and forensic due diligence. Moreover, you also need to prepare an Information Memorandum(IM), Teaser Deck and Pitch Presentation, along with action plan for next 3 to 5 years before engaging with prospective buyers.
2. Ensure that the right team, business systems & processes are in place: You may have innovative products and highly profitable business, but unless you have a strong team and the right systems & processes, your company is simply not sellable. You should have well-defined systems & processes with clearly written company policy, even for critical decision making. Any business that requires business owner’s intervention to grow and/or succeed generally raises a red flag for buyers. You must also have a team of qualified and experienced employees to run your company’s day-to-day operations. This might be uncomfortable for many owners as it takes away their decision making powers, but you need to get used to it if you want to sell your business.
3. Relook at your business model to define how you create value: Now that your business is going to be evaluated by an outsider, you need to dispassionately look at how you run your business. Sometimes business owners are so pre-occupied with running the business, they don’t get the time to critically evaluate their business model. Just because you have been successful all these years does not guarantee future success. So, it is important to relook at your business model to make your business future-ready. Ask yourself: what value are you creating in your business. Moreover, what is valuable for you may not be valuable for potential buyers as value is not just about revenue or profit or assets. Your potential buyer may find value in your product portfolio, your set of customers, your distribution network, your geographical presence and many more. If you can offer the right value, you can command the right valuation.
4. Give a good reason to sell:When you decide to sell your business, you must have a sound reason to sell. Start with WHY you would like to sell your business. Some owners want to sell as they want to retire early or sometimes their next generation is not interested in their business. Unlocking the value of your business at the right time could be the most logical reason. The best time to sell your business is always when you are doing well. The potential buyer must know that you are not forced to sell. Never go to the buyer when your sales & profits are declining or you are losing market share or you are facing a severe cash crunch. You will end of giving up your business for much less than you are expecting. The buyer will pay you more when the revenue and/or profits are growing.
5. Create a compelling story: Though a high-value business transaction is considered logical and highly rational decision, but striking the right emotional cords can certainly help smoothen the process. To be a potential acquisition target, you must emerge as a prominent, respectable name in your industry. Your business must be recognised and appreciated by industry associations, government bodies and other stakeholders. Your business must have a high brand recall among your customers, suppliers and vendors. You as business owner / promoter must be seen as a key opinion maker of your industry. Here, the brand image of business owners / promoters also plays a critical role while evaluating a company. The business owners may consciously work towards building a favourable brand image for themselves. You must articulate your thoughts about your business & industry. Let the buyer see your vision and convert that into numbers. If they buy your vision, they buy the valuation numbers.

Finally, you must note that companies are bought, not sold. It does not mean that the only way to sell your company is to wait patiently for buyers to come to you. You need to actively and smartly engage with the potential buyers through innovative ways. Just like a peacock attracts the attention of peahen by putting his best foot forward, you also need to spread your wings to attract the attention of potential buyers by creating the right buzz about your company. First get noticed by your potential buyers for all the right reasons. Let them find out about you and your business. Remember, we buy only from those whom we know, like and trust!

Note: Today the effect of coronavirus pandemic has adversely affected businesses across the world, therefore it is highly unlikely that you can get desirable valuation of your business at this point of time. But you can take this opportunity to prepare your business in next 12 to 18 months to make it more “sellable”, so that once the business sentiments improve, you are ready to engage with potential buyers.