Want to know how to sell a small business fast? Selling a company should be a business owner’s finest hour. Ideally, you want to get top dollar for your business and possibly minimize the impact on the employees who helped get the business to a lucrative finish line.
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How should business owners prepare for this big event?
How to Sell a Small Business Fast
Matt Kelly, managing director of North Point Advisors, a San Francisco-based mergers and acquisitions advisory firm that specializes in restaurant and consumer brand transactions, says that the best way for business owners to achieve a successful outcome is to first be really clear on transaction objectives.
“No two transactions are alike. For some owners, success is selling 100% of a business and heading for the beach. Other owners want to sell a portion of their company but remain involved in helping the company achieve even bigger goals. When you know what you want to achieve, it’s easier to line up the right prospective partners,” commented Kelly.
Kelly also says that part of the process of preparing a company for a sale is for business owners to be honest about company weaknesses long before potential buyers ask tough questions.
“Investors will spend several months pouring over a company’s business records and market position. They will find the problems. If business owners don’t have good answers, buyers can walk away or substantially lower deal pricin,” says Kelly.
Of course, when looking to sell a small business fast, the key to a lucrative sale is attracting interest from a number of potential business buyers or investors. There are two types of buyers for prosperous businesses: financial buyers and strategic buyers.
Financial buyers include private equity or "buy-out" funds that like to take controlling interests in companies that have the potential for another good growth spurt. Their typical investment horizon is three to five years, with IRR financial return objectives in the mid 20 range.
Strategic buyers tend to be longer-term investors and can include any business that would benefit operationally from owning all or a significant stake of a business. Often, strategic buyers are competitors, large customers or other businesses that need to expand their operating capabilities, intellectual property portfolio or customer relationships.
Here are four more recommendations to help sell your company fast:
Develop a target list of acquirers. Even if your company will be represented by an investment banker, it’s helpful to think about likely candidates to buy your business long before you want to sell your business.
The purpose of developing this target list is to start thinking like a buyer. What attributes of your business will make it more or less valuable to potential buyers? Is it your operating facilities, know-how, ability to serve varied types of customers, or financial performance? All buyers tend to bid up businesses with industry leading profitability and a narrow range of competitors.
Visit your accountant. Every business in America has Uncle Sam as a business partner. Before negotiating any deal with prospective buyers, it's important to learn what types of transactions may boost your tax obligations. Ask your accountant if it is more advantageous for you to sell the assets of your company (often a preference of business buyers to reduce the risk of buying hidden liabilities) or sell shares of company stock.
Prep your company for sale. In the same way home owners spruce up their homes before talking to rental agents, business owners benefit when they have the opportunity to unload unprofitable customers, cut unnecessary expenses, and build up areas of perceived business value. Do everything you can to build consistency into your company's financial and operating performance. Also make sure all tax obligations and filings are current and your accounting records are "clean" for potential buyer review.
Select your support team. Take good care interviewing law firms that will represent your company during sale negotiations. Also if you decide to hire an investment banker to solicit potential buyers, make sure the intermediary has the prestige and expertise to represent your company well. The key to a good intermediary is smart deal positioning and the ability to get return phone calls.
Well-respected investment bankers also help owners sort through their options without any pressure to make fast decisions. “The decision to sell a company or enter into long-term relationships with financial investors or strategic buyers is very personal. It can’t be rushed,” commented Kelly.
Susan Schreteris a veteran of the venture finance community and entrepreneurship educator. For more easy action steps on how to attract investors and make any new business idea bigger, better and more profitable, it’s time to Start On Purpose Follow Susan @StartOnPurpose