Want to Sell Your Business? Tips from a Valuation Expert
After you have built up your business, you might decide -- at some point -- that it's time to sell. Indeed, if you are getting close to a major life transition, selling can seem attractive.If you believe that you are ready to sell your business, however, you should be prepared to protect yourself and be ready for what's next.
Recently, I spoke with Allan Siposs, Managing Director and Head of FMV Capital Markets. Among the services offered by FMV is business valuation. Siposs knows what it takes to get an equitable deal when you sell your company, and he shared some of his tips.
Deals Are Still Getting Done
"First of all, there is this belief that there are no deals getting done right now," Siposs said. "This isn't true. There is a tremendous amount of interest from private equity investors and strategic investors and other buyers. You need to prepare, though, if you want to attract buyers."One of the ways to prepare is to think about what might be a concern for a buyer. "Look at what might be a problem from a buyer standpoint," Siposs suggested. "If most of your revenue is tied up with one customer, you might have a problem when going up against someone with diverse revenue. What about transition management? Is your company too tied up with you? Look at accounting issues, and also look for issues with OSHA or the EPA."
After identifying these issues, it is up to you to address them, and make changes. Look for these issues well in advance, so that you can have them in hand before buyers start looking into your operation.
Siposs also pointed out that you need to make sure you have a competitive process. "You should be entertaining more than one buyer. Consider retaining someone to represent you, and help you identify buyers that might have an interest in your business. You want to make sure that you have someone knowledgeable in your corner, helping you get the best possible deal."
It's Not Just About the Numbers
Sometimes, the best possible deal isn't about the number. "You need to look at the structure of the deal as well. Business owners can get so hung up on a number, that they forget to look at the structure of the agreement, which can include contingencies, payment structure, and other compensation," Siposs said. "Many business owners end up surprised that the structure of the agreement means that, even though they got the amount they wanted, their actual payout is somewhat low."In addition to actual pay, Siposs said that business owners also need to pay attention to who will control the company after it is sold. If you want to remain involved, this is especially important. "You need to know how you will get paid, who will be in control, and how you can get your company back if you don't like how things are going," he said.
Finally, make sure there is a very good confidentiality and non-solicitation agreement in place. "You don't want potential buyers to be able to use anything against you," Siposs pointed out. "Before you reveal anything about your financials, or any other details about your business, make sure that you have the right protective agreements in place."
It is possible to sell your company now -- and get a good price. However, you shouldn't just put it out there. Plan ahead so that you can make your business attractive, and so that you can protect yourself. Otherwise, you might end up getting the short end of the stick.
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