By Jay Carter, Founder and CEO, MarketView
The Four Steps to Selling a Business
M&A activity is at an all-time high. The number of transactions is high, valuations are high. Some business owners are approached on a daily basis by eager buyers, hoping their timing is right and the owner is willing to sell their business. With all of this activity comes a lot of confusion - especially for the business owners.
Business owners are business owners. They build and operate businesses. They do not typically buy and sell businesses. So, even though M&A activity is at an all-time high, it’s not for most business owners. Most have still never bought or sold a business and when approached by potential buyers, they are, understandably, uncertain about what to do.
Today, we’re covering Step 3 (“Promotion”) in the sale of a business. This is the third of our four-part series discussing the four steps to selling a business.
As a reminder, the four steps to selling a business are:
1. Assessment
2. Improvement
3. Promotion
4. Closing
Step 1, Assessment, is all about understanding what you have to sell and what your goals are for selling it. Step 2 involves prioritizing value opportunities previously identified in Step 1 and taking specific steps to increase the value and salability of your business. Now, in Step 3, Promotion, we are talking about the process of putting the business on the market and offering it to potential buyers.
Many business owners begin their sale process with this step and unwittingly skip Steps 1 and 2 (Assessment and Improvement). Sometimes the owner is simply not aware that there are additional steps to selling a business. For others, they receive interest from an unsolicited suitor without preparation and are propelled into a sale process mid-stream.
During Steps 1 and 2 is a convergence of two treasured factors in the sale of a business; i) reduced risk and ii) increased value. This combination produces opportunities for extraordinary wealth creation.
Any owners wanting to preserve the option of selling their business in the future and who have not completed Step 1 should do so as soon as possible, and Step 2 should be ongoing until the business is sold.
For Step 3 (“Promotion”) of the business sale process, there are two key objectives: 1) to hire the right investment banker or business broker (“M&A Advisor”) to represent you, and 2) to identify and select the best buyer for the business. As with Step 1, is strongly advised that business owners not attempt this step of the sale process solo. The same reasons given for out-sourcing Step 1 apply to Step 3. Besides being a huge time suck and distraction for management, a sale process handled internally does not benefit from the years of experience, knowledge, and resources a good M&A Advisor brings to your process.
And don’t confuse the role of an M&A Advisor with that of other professionals who participate in the process, like lawyers and accountants. You’ll need lawyers and accountants to complete your sale, but they do not provide the services of an M&A Advisor. The M&A Advisor is the outward-facing voice and advocate for the business. They provide marketing and sales services aimed at finding buyers and negotiating transaction terms for the sale of your business.
Hiring an M&A Advisor should involve a process much like recruiting and hiring a new executive for your business. As an owner, you will spend the next 6-12 months working very closely with your advisor. The selection process should involve reviewing the credentials of multiple firms, interviewing the firms and allowing them to pitch you on “Why them?”, and selecting the firm that has the expertise, relevant experience, fee schedule, reputation, and equally important, the personality, that is a good fit for you and your business.
Take your time to find the right fit and don’t hire an advisor just because they are convenient, or they are the only one you know, or they are the one your friend used. It is unlikely that these are the best advisors for you. Conducting a thoughtful vetting process can be the difference between a successful and an unsuccessful sale.
Once you have selected the right advisor, they will prepare marketing materials, identify potential buyers, and present your business to a large number of potential buyers. This process can last from 2-6 months to complete, is expected to produce multiple competing offers, and culminates with the negotiation of the best deal possible with your preferred buyer.
To help with the process of hiring an M&A Advisor to represent you in the sale of your business, we have put together a checklist of questions to ask and information to review before hiring an advisor. Please find the checklist on the following page.
In the next issue, I’ll be covering Step 4 of the four-step sale process: Closing.
For more information about the four steps of a business sale, please contact me. I’ll be happy to answer questions about your unique situation and conduct a free 30-minute sale readiness assessment for your business.
Sincerely,
Jay Carter
Founder and CEO
MarketView
704-904-7543
jcarter@market-view.com
