Many people will never own a business. Of those who do, few will ever go through the process of selling more than once in their life — and the first time you do anything is the hardest. So, here are a few things to keep in mind if you happen to be one of the lucky ones who have the opportunity to sell your business.
- Preparing to Sell a Business Takes Longer Than Preparing to Sell a House
When selling a house, you take a few months to clean it up, maybe invest in new carpet and paint, and stage it professionally to make it as presentable as possible.
The equivalent to new carpet and paint when selling a business might be increased profitability and sales — things that typically take longer than a few months to accomplish. Make sure you set your expectations appropriately.
- Deal Fatigue Is Almost a Certainty
The inspection process when buying a house rarely takes longer than a month; the inspection process when buying a business (due diligence) rarely takes less than three. In fact, six months or more is not uncommon for larger, more complicated businesses — and that’s just one part of the whole process.
Once you decide to sell your business, the time from the moment you enlist the help of a broker or investment banker to the moment you close the deal is typically six months to a year. Again, that’s for a small, fairly straightforward transaction. Expect a longer timeline for a larger, more complicated business.
- It’s Hard to Keep Things Secret, but You Must
When you sell a house, you put up a sign and tell the world it’s for sale. When you sell a business, you don’t want anyone to know it’s for sale until the ink is dry. You risk employees or customers leaving if they find out you won’t be there long-term. If you lose key employees or clients, it could spook the buyer and scuttle the sale. Keeping things quiet gets harder the longer you are in the due diligence process, but it’s absolutely imperative.
- What You Think It’s Worth Doesn’t Matter
When selling a house, your agent will suggest a price based on comparable properties in the market. Buyers value the house with a fairly good assurance that real estate will appreciate over time.
You can compare your business to other businesses, but there are no assurances for a buyer that any business will continue to appreciate. So, a business is worth only what someone is willing to pay for it. Be prepared to field offers that are far less than you think your business is worth — this happens to most business owners. It’s important to curb your emotions, even if it feels like people are calling your baby ugly.
- Going it Alone Leaves You Vulnerable
I made the mistake of selling my first business without the assistance of anyone except my attorney. I didn’t know what I didn’t know. Looking back, I would have done several things differently and believe, had I had additional advisors with M&A experience alongside me, I could have avoided the aspects of the sale I now regret.
For most people, their business’s value represents the largest egg in their retirement nest. Going into it without a good team of experienced advisors is like deciding you want to learn to gamble, so you take your 401(k) to Vegas for the weekend.
In summary
Selling your business is likely to be harder, longer, and a lot more stressful than you expect. The best thing you can is enlist a team of advisors to help facilitate the sale, which might include an investment banker, an attorney and a CPA experienced with M&A work. Selling a business is a nuanced specialty; just as you wouldn’t want your family doctor performing your knee surgery, you don’t want someone without M&A experience selling your business.
You should also consult with your financial advisor well in advance of selling your business, three years or more if you can, so you can position things to minimize your tax burden upon the sale. Any money you save by trying to do things yourself is realistically peanuts compared to the time, money and heartache you will avoid by investing in good counsel.
John Kaminski
Guest Author
About the Author
John Kaminski is a partner and managing director at OneAccord, a values-based group of business experts who help Pacific Northwest business owners buy, sell and operate their businesses.
John began his sales career with Xerox and went on to work in the medical device industry prior to starting his own business, which was twice named a Best Company to Work For. He has more than 25 years’ experience in sales and marketing and has been recognized as a top performer at every company with which he has worked. John leads the strategic planning practice for OneAccord and works with business owners preparing for succession or sale. He is passionate about helping businesses establish a winning culture and grow exponentially.
You can learn more about or connect with John here.
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