The Science of Selling Your Business

If you own a business, you know selling it is a big deal. It’s the culmination of all your years of passion, hard work, and sacrifice. At some point in your entrepreneurial journey, you might want to exit your business to retire, free up liquidity for new projects, or satisfy big dreams. 

If and when you’re planning to put your business on the market, you’ll want to make sure it stands out in the competitive space. There’s a tsunami of business owners looking to sell.

76% of Canada’s business owners plan to exit their business within the next decade.

So how do you get yourself ready for the future you want? Planning, planning, planning. 

By being proactive, you’ll increase your chances of finding the perfect buyer, get the best price, and minimize the stress of the sales process. (The opposite is also true: If you’re not prepared to sell, you’ll likely leave money on the table, get caught off-guard a forced sale due to illness or divorce, and risk having a failed deal. Don’t forget the added stress!)    

Here’s what you need to know to get the deal you deserve.‍

Do The Groundwork

There’s more to exiting your business than putting up a “For Sale” sign or publishing a listing. There’s lots to consider so take the time to build a strategic plan that lays out measurable goals that you can tick off over time: 

• Identify and make changes that will help increase the value of your business and make it more attractive to potential buyers. Find efficiencies and/or lower your cost of goods. 
• Think about the best or right time to sell. You might, for example, wait to sell until you can show increasing sales year-over-year, healthy gross margins, and/or above-average profitability for a business in your industry.
• Start a list of potential buyers and identify features of your company that would benefit them. To look for good candidates, research your competitors, look towards the memberships of industry associations, and review trade publications. 
• Break down what the transition might look like in terms of relationships with suppliers and customers.  

Pick Your Team

Though you are the primary driver for the sale of your business, turn to the professionals to help guide you through the process. They’ll help you get ready, steer you through the complexities, and avoid any major pitfalls. 

• Your strategic advisor, like ACCFutures, will work with you to position your business, set the right price, and structure the transaction for a successful sale. They can connect you to the right people, including people who can give you an honest valuation for your business.  ‍
• Your lawyer is your ally for business transition; they’ll help you negotiate your purchase agreement, draft non-disclosure agreements, and help you navigate any legal issues. ‍
• Your accountant will prepare your profit and loss statements, tax returns, balance sheets, and important documents that your buyer may require. Bonus: They’ll also help you structure the deal so you can minimize tax liabilities from your sale. ‍
• Your financial advisor plays a critical role in helping you figure out how to distribute the proceeds of your sale. Should you save or invest? How will you minimize the taxes from the proceeds of your sale? Your advisor can answer those questions. ‍

Get the memo 

When you’re getting close to putting your business on the market, you’ll prepare a sales memorandum which includes your company profile and a market analysis. Paired with other marketing channels like real estate listing, networking, word-of-mouth, the memorandum can help you attract a buyer. With this in hand, you’re ready to mine the list of potential buyers that you created: competitors, industry contacts, etc. 

When you find yourself with a potential buyer (or a shortlist of them), it’s time to screen them, qualify their offers, and have them sign a confidentiality agreement before you provide any further details or sensitive information. 

Sit at the negotiation table

Selling a business isn’t a sprint; it’s a marathon that requires patience, flexibility, and lots of skilled negotiation. This is where your preparation meets opportunity. 

• Keep your advisor close during this phase. They’ll act as your sounding board, keep you focused on the important issues, and help coordinate the other professionals involved in the process. 
• Have a backup plan in place even before your negotiations begin with your interested party. If the current deal doesn’t come through, do you have anyother buyer in mind or can you hang onto the business longer? Have a Plan B means you won’t be left empty-handed. 
• Understand your buyer’s motivation. Are they looking to expand their business or looking to yours as a simple investment opportunity? The more you know allows you to best position your business to meets their needs.
• Be clear and transparent while negotiating with your potential buyer. Establishing this open relationship with them is critical in a successful negotiation and sale. 
• Be flexible but firm. Discussing the price for your business is a delicate dance. Be open to compromise but know that it’s also important to stand your ground for what you know to be a fair price. Lean on your advisor to help you navigate this.
• Walk away if it doesn’t feel right. If the buyer’s final offer isn’t living up to your terms or you don’t like the terms of the deal, stick to your guns. That could bring the buyers back to the table with a better offer or lead you to a better outcome with another seller. ‍

‍Seal the deal

Closing the sale is a critical part of the process and you’ll need to pay close attention to the details.  

1. To start, your lawyer will draft your Purchase Agreement. It outlines all the terms and conditions of sale including the price, payment method, and any contingencies or warranties. 
2. Once the purchase agreement is signed, you’ll need to transfer ownership by updating all legal and business documents—licenses, permits, lease agreements, etc—with the new owner’s information.
3. Finally, you’ll let all your stakeholders know about the change of ownership. While notifying your employees, customers, suppliers, and lenders of the transfer, don’t forget to  thank them for supporting your business throughout the years.   

The end of the sale of your business is just the beginning of a new chapter for you. Whether you’re involved in the business post-sale or walking away completely, move forward with confidence knowing that you’ve successfully planned for your future!

‍

If you’re getting ready to sell your business, don’t tackle the process alone. Our expert advisor at ACCFutures can guide you through the sales process—from planning to close—and help land the deal you want. Reach out to us anytime.