The Best Tips for Selling a Business

Selling a business is a complex endeavor that requires careful preparation and execution. Here are the best tips every entrepreneur should know to ensure a successful sale of their business.

A particular concern for entrepreneurs is to hand over their life's work into trustworthy hands and to guarantee a secure job for their employees.

As professional M&A advisors, we know:

Sometimes it's challenging to attract buyers, but it's easy to deter potential buyers with the wrong or unprofessional approach.

So what should you consider when selling a business? In this article, we've compiled the 10 best tips for selling a business – from preparation to closing. Discover which aspects enable a successful sale and smooth transition, and learn how to avoid common pitfalls.

Business Sale - Tips at a Glance

1. Formulate a Clear Exit Vision Before the Sales Process Begins
2. Be Aware of Your Strategic Success Position (SEP)
3. Choose the Right Timing for the Business Sale
4. Prepare the Business Sale Early and Carefully
5. Have a Professional Business Valuation Conducted
6. Consult a Suitable Succession Specialist
7. Ensure Transparency Throughout the Entire Business Sale Process
8. Extend Trust to All Parties Involved in the Business Sale
9. Seek Advice on Tax and Legal Matters Related to the Business Sale
10. Plan the Transition and Integration of Employees Early

1. Formulate a Clear Exit Vision

Before initiating the sales process, make a firm decision on what should happen with your business and what your ideal buyer looks like. This is especially important if the successor is not predetermined, such as when the business does not pass to a family member. There are many questions to clarify, such as whether an external manager should be hired or the business sold entirely.

Make a Clear Sales Decision:

Only once you're sure how many shares of the business you want to sell can the sales process begin. You have several options: The business can be sold entirely, with a control body taking over management, or you may retain minority shares to continue influencing the business's future.

Here, terms like Asset Deal and Share Deal come into play. An Asset Deal involves the sale of tradable goods, while a Share Deal involves selling shares of the company. Find more information on these terms in our glossary.

2. Be Aware of Your Unique Selling Points (USP)

When selling a business, it's crucial to understand how the company is portrayed externally. Every business has core competencies that distinguish it, and these should be highlighted in the sales process.

These strategic competitive advantages aid in market positioning and differentiation from competitors. They showcase the benefits your services or products offer.

Clearly articulating your strategic success position can increase the sale price by enhancing the company's value. Additionally, it allows you to emphasize features of the company that are important to you, highlighting the uniqueness of your organization.

Learn more about how to increase your business's value.

3. Choose the Right Timing for the Business Sale

Choosing the right timing for the business sale is crucial and should be strategic. Don't wait until the business isn't doing well or until you feel unable to manage it any longer.

Why this is important:

• Better Negotiating Position: Early preparation offers a better negotiating position.
• Market Value Increase: A positive development of your business increases the market value.
• Benefit from Profits: Don't sell too early to benefit from profits.

An M&A advisor can provide valuable tips here.

4. Prepare the Business Sale Early and Carefully

To avoid time pressure, careful preparation is essential. Updating all books right before the sale can delay or halt processes. These complications are easily avoidable.

Depending on the size and industry of the business, plan 12 to 24 months for the full completion of the sale.

Do Not Underestimate the Complexity of the Process:

As the business owner, you are involved in all decisions and need to familiarize yourself with the details. Prepare early and educate yourself on the business sale process.

5. Have a Professional Business Valuation Conducted

An objective business valuation is crucial for creating a realistic negotiation basis. Traditional methods like the Earnings Value Method or the Discounted Cash Flow Method (DCF) help avoid a subjective overestimation of the company's value.

Increase Business Value Before Sale:

An objective valuation not only helps set a realistic sale price but also identifies potential weaknesses that should be optimized before the business is offered for sale. Our expert team assists you in negotiating a fair and attractive price.

6. Consult a Suitable Succession Specialist

A succession specialist assists you with:

• Goal setting
• Business valuation
• Preparation of sales documents
• Market value enhancement
• Negotiations with potential buyers
• Legal and tax issues
• Transition support

Choosing the Right Advisor is Key:

Select an advisor who not only has professional competence but also understands and respects your personal wishes.

7. Ensure Transparency Throughout the Business Sale Process

Provide complete, accurate, and understandable documents. Serious buyers and investors expect professionalism and transparency, which builds trust and enhances the business's value.

8. Extend Trust to All Parties Involved

Trust your advisors and the buyer to ensure a smooth transaction. Only engage in fair deals and conduct negotiations with multiple interested parties in parallel.

9. Seek Advice on Tax and Legal Matters

Experts in tax and legal fields ensure transaction security. Options such as age exemptions or the one-fifth rule may be relevant.

10. Plan the Transition and Integration of Employees Early

Ensure job security and plan the transition carefully. Learn about employee rights in our specialized article.

Conclusion

By considering these 10 tips, you can avoid common mistakes and successfully complete the sale of your business. An experienced advisor can support you in all phases and lead you to success.

Thinking About Selling Your Business?

With CARL, you have an experienced consulting partner who supports you professionally. We help you find potential buyers, guide you through the negotiation process, and more.

Contact our team of succession and transaction experts today!