If you are thinking about selling your business in the next year or so and you have never been through an exit or sale, then you may want to take a step back and evaluate what would be the best process to achieve your desired outcome.

This is usually not something that can be done well in a few months. The time to prepare for a successful sale or exit can take as much as two to three years before the event takes place.

It is also important to acknowledge that selling a business is something most owners have never encountered. It is a large undertaking and may involve skills that are different from the ones the owner has used to build the business. Qualified assistance will most always improve the final outcome.

Finding the Right Outcome

The first issue to understand is what outcome is acceptable to you. In other words, it is a good idea to know what your personal goals are. You will want to examine how much money you want or need to live, what you want to do post-sale, what you want to happen to the people and assets of the existing business after your exit, etc. When you are thinking about selling a business, it’s a good idea to start with these goals in mind.

Determining Value and Sales Method

The next thing you need to do is to be realistic about your business. Evaluate the performance of the business over the past several years, the consistency of its profits and growth patterns, its problem areas, the quality of your management and the long-term outlook of your business within its industry environment.

Once that has been assessed, a formal valuation of the company could be the next step. A formal valuation entails an objective
third party that uses factors including revenues, profits, growth rates, industry averages and recent sales to give you a more formalized range of enterprise value.

Be aware, however, that a formal valuation is just about the potential market value of your business at a given time. Depending on the way you want to sell, you may get substantially more. And, of course, you may get less. Pre-sale preparation and the sales process play a very large factor in the final outcome. There are several ways that the business can be sold, all of which take time to properly execute, including intergenerational sales, strategic sales, an investment bank auction process or a sale to employees.

Preparing for a Sale

By knowing what your personal goals are, what the business is worth today from a formal valuation, whom you would like to sell to and the best process to do so, you can properly evaluate your ability to reach your goals if you try to sell or exit at this point in time.

There are many pre-sale action items to consider that would enable you to reach your desired goals. These might include increasing your revenues and market share, increasing marketing, managing customer acquisition costs, managing profit stability and rate of growth, and meeting potential business environment threats, to name a few.

All of these things and more need to be considered well in advance if you would like to have a successful exit from your business. Planning this process and working hard at it will always lead to much better results than not following a formal process to prepare for the sale of “your baby.”