Are you ready to sell your business?

There may come a day in the future when you think it's time to sell your company.

Maybe you have something else you want to do, or maybe you want to take a vacation to travel, devote your time to other pursuits, or focus on family life. Either way, there are important key questions for business owners considering selling their business.

It is important to understand that you will not be able to simply and quickly sell the company on the same day. Sale of business — it is a process with a huge number of points that need to be thought through. It requires careful planning to make sure you make the right decision. This way you can achieve the best possible sale — both in terms of deal structure and cost.

That is, the sale of the business — this is something that needs to be planned and prepared in advance. In fact, if you decide to sell your business, the minimum time you need to prepare is a few months, but it can go up to a year or more.

These months can feel like an eternity, especially if you're determined to sell your business. But if you take that time to prepare carefully, you can get a price that reflects the true value of your business and the work you put into it.

Things to consider when planning to exit a business

Given the importance of the decision to sell a business, there are a number of things to consider when preparing to sell.

Have you discussed this with the right people?

As a business owner, managing a company is certainly a huge part of your life and, by extension, the lives of those close to you. Therefore, when considering the sale of a business, the first important step is to discuss this decision with those who may have the greatest impact.

You should regularly consult with your accountant and other professionals. Key people in your business should also be consulted, especially if they may take on more significant roles after you complete your exit process.

But it will be equally important to discuss this issue with your family and other close people. During and after the sale of the business, they are likely to be the ones most affected by the process and what you choose to do after it.

Keeping all of these people up to date on your plans throughout the sales cycle will be especially important. This is necessary so that there are no unpleasant surprises for anyone. And all of them (to varying degrees) can help you in your decision to sell and the subsequent process.

Do your personal, financial and business goals match?

It is worth considering that it is very important (before you make your final decision and start preparing for the sale) to think about your own goals for the future, which, in fact, are the reasons for your desire to exit the business.

You will want to consider your future goals in terms of your personal life, as well as in terms of business and finances. Although these goals are separate from each other, they can also be interdependent and linked in several ways.

As for your personal goals, here you need to consider in detail what you want to do next in your life. What exactly do you want to do after you finish your job? Are you planning to retire or take a vacation? Or are you moving to start a new business? If you didn't have to work anymore and didn't run your business full time, what would you ideally like to do?

Personal goals are often an incentive for an owner to leave a business, so it is imperative that they are clearly defined and thought out in advance. Many business sales fail because the selling owner becomes hesitant to exit. Make sure you have something after the sale that you care about. This will help eliminate uncertainty in the sales process. So you won't feel lost after the transaction.

When it comes to your financial goals, the most important — consider your personal and business goals after the sale of the business and determine how much money you will need to make them a reality. Talk to a financial advisor or planner to get an idea of your current net worth and the value that selling the business can bring.

It may turn out that a significant part of your financial value is associated with your company. You need to determine if the sale of the business can bring in the money you need to be able to live the life you want after the sale. If not, then you will need to look even more closely at ways to add value to your business before selling.

From a business perspective, consider what state your company is in and whether it can be transferred in its current state. Analysis of the optimization of the structure of your business and its work will allow you to see areas for improvement. They will not only make the business more marketable, but also increase its value. This, in turn, will allow you to determine the business goals that you need to strive for before selling.

Have you formed an advisory group?

A strong team of consultants with a wide range of knowledge and experience — it's a central part of the selling process and something you need to shape early on. You will need a core team that you will communicate with on a regular basis, including a lawyer, an accountant, a wealth or financial advisor, an exit consultant, and someone with pre-sales value creation experience.

In addition to this core, think about other professionals you might want to bring in. This could be business partners, a tax professional, an insurance specialist, or any other professional with experience in a field that will be critical to successfully selling and achieving your goals after you exit the business. Engaging such a diverse professional team will bring some independence to the process and provide depth of understanding. Experience and advice that would otherwise be lost if you planned your outing alone or only worked with a small team of people close to you.  The best option would be to contact business brokers.

Do you have a fallback?

It is also worth considering that sometimes circumstances can get out of your control, and even the most well-planned and thoughtful business sales can go wrong. For this reason, you should develop a robust contingency plan. You can resort to it if things go wrong.

This is an area where your consulting team will play an important role early on. You should also develop a plan that defines exactly what will happen if something unexpected happens. For example, you may have to abandon plans to sell, you may not be able to manage the business, or you may be forced to exit earlier than planned.

Did you complete the required assessments?

Before the sale, you need to conduct several assessments to get a complete picture of the state of your business. First of all, you need to know how much your business is worth and conduct a thorough assessment.

Businesses in high-growth sectors often have higher multiples, while slow-growing businesses tend to have lower multipliers. Another factor is that large companies with higher earnings and a solid management team will also have higher multiples than smaller companies. Consulting with a financial expert and historical multiples for similar companies in your sector can help you determine the right number for your business.

In addition to the cost estimate, you will also need to conduct a strategic analysis and financial assessment of your business. To enable potential buyers to conduct due diligence process , it is necessary to prepare fully audited financial statements for the previous period, financial forecasts, as well as up-to-date personnel, legal, tax and client documents.

What exit options do you have?

There are a wide range of ways to sell a business, and before embarking on this process, you need to consider the various exit options available to you. You also need to determine which deal structure is best for your company. Are you selling the business to an external buyer — for example, a private equity firm or a strategic buyer — or are you planning to transfer the business to someone who is already working in the company or close to it, for example, through a management buyout?

You need to decide whether you are going out of business completely (full sale) or stepping back from the position of owner and taking on a smaller role (partial sale). If this is the second option, you should clearly define in advance what your future role will be.

Have you made an exit plan?

Exit — it is a process that takes a significant amount of time and it is essential to have a detailed plan outlining how you envision it. A good exit plan should include formulated goals and objectives, as well as clearly defined objectives and information about who is responsible for them.

You will also need to identify the transition team, plan leaders and project managers working on the transition, a schedule for each phase of the transition, a budget, and details of your role as owner before, during, and after the transition.

The plan should provide for its full implementation, starting with a clear statement, completing its various stages, and ending with the completion of the sale and plans for the period after the transition.

How will you add value to your business before selling?

Once you have a clear idea of the current (presale) value of your business, you can start looking for ways to raise it before selling. The selling value of your company will play an important role in ensuring that your personal and business goals are realized after you exit the business.

Increasing the value of your business before going out is key. These methods should be built into your exit plan, and at different stages throughout the implementation strategy.

Developing strategies within a set timeframe and evaluating them regularly (eg every 90 days) will help you keep track of how much your business is worth. This is necessary to bridge the gap between the pre-sale price and the figure you hope to get as a result of the exit.

You can start this process by conducting due diligence with your advisory team to find out how you can mitigate business risks and implement value maximizing strategies. With the help of a tax specialist, you can explore ways to minimize taxes when selling a business. An exit strategist can suggest  how to improve the chances of a smooth and cost-effective ownership transition.

Do you have a leadership succession program?

The leadership succession program will be key. This stage is needed to ensure that the management team after the transition is ready to manage the business after you leave it. This will be especially important if the revenue you receive from the sale is somehow linked to the future performance of the business, for example, through the payment of remuneration.

Too much dependence on the owner is one of the main reasons for the collapse of the business after the sale. Having a well-designed succession program is vital to mitigate this risk. While the transition occurs at the end of the sale process, it is highly recommended that you and your advisory team work on leadership succession planning early on. Making sure that the business will be able to continue without you, and you will be free to realize your future personal and business goals.

Sale of business — the ultimate goal of achieving the life you want to live after the sale, whether your goals are personal or business related. The best way to achieve your goals — it is a well-planned, thoughtful and well-executed sales process that begins to take shape months, and sometimes years, before the actual transition.

To make such a deal without stress and risks, you should contact the professionals – business brokers. Business brokers can assist you in estimating the value of a business, developing a selling strategy, preparing the necessary documents, negotiating and closing a deal. They know the market and have experience working with various cases, which allows them to provide expert advice and assistance in solving various issues related to the sale of a business. 

One of such professional teams operating in the international market, — is the Russian-Eurasian Business Broker (REAB). Our team will help professionally prepare all the necessary documents, as well as to accompany you through all stages of this complex and time-consuming process.