Selling a business is no easy feat, especially if it’s your first time navigating the process. With so much information available on the topic, it’s easy to become overwhelmed which is why we recommend engaging with external support to provide guidance.
Whether you’re trying to find the right buyer to take over your business or you’re an aspirational entrepreneur preparing for your next great opportunity, engaging professionals in the process can not only help to make more sense of the options available to you, but also increase the probability of a fair and reasonable purchase or sale valuation.
Here are our top tips for choosing experts when selling a business.
Experts for sellers
The biggest mistake we see business owners make when looking to sell is a lack of preparation. Legal documentation, financial reporting and managing your employees are all areas that play a critical role in transitioning ownership, and a lack of foresight and planning can hinder and potentially derail a successful exit.
This can be particularly problematic if, as an owner, you’ve already decided to move on to a new venture. Exiting a business is often one of the most important and meaningful events in the life of an entrepreneur, and it’s important to have the energy, focus and stamina to see it through.
When it comes to enlisting the help of a professional, there is no cut-and-dry answer for which expert will be the most valuable in your particular circumstances, but there are a few we commonly see involved.
Creating a competitive valuation
In this space, accountants and mergers & acquisitions (M&A) advisors can provide significant value in determining an optimal valuation and developing a compelling business sale narrative that goes well beyond your company’s regular financial reporting.
Typically, you’ll work with a Chartered Business Valuator (CBV) or team who will dive deep to uncover value in your business and provide a range of potential values based on tested valuation methodology. Working with a professional can also help manage the emotional dynamics a seller can experience, as well as any emotional bias around the valuation.
Some financially prudent owners might be hesitant to bring in an expert because of the cost that can be incurred, but in many cases a professional can help to significantly improve your valuation and cash flows. Even if you decide to hold on to your business, having an investment mindset—spending today to earn tomorrow—can create more operational efficiencies, saving you money in the short-term and increasing your EBITDA multiplier should you choose to sell in the future.
Ensuring sustainable succession
Entrepreneurs are some of the most passionate people you’ll find—until they’re ready to move on to a new venture. In an ideal scenario, a business owner will have been working diligently for years at creating and updating policies, processes and procedures for how to run the company.
In situations where organizational standardization needs to be accelerated, an executive coach can be valuable to help clarify your selling motives and identify roadblocks to your goals.
Depending on the specific gaps you’re looking to fill to ensure a smooth transition, a few other types of advisors may include:
- Human Resources (HR) Professional – A good HR advisor will help with everything from creating and reviewing policies, to planning recruitment and retention strategies, to even providing a communication strategy to manage your employees’ transition to a new owner. Even if you have in-house HR, a specialist with experience in business transitions could be a great complement to your team throughout this process.
- M&A Advisory Firm – M&A firms specialize in preparing businesses for sale. They’ll look at your financial position and organizational structure and make recommendations on how to make the business more appealing to a prospective buyer. For best results, this process can take 6-12 months of ongoing work.
- International Organization for Standardization (ISO) Certification – An ISO certification can be a great signal of an efficient organization. It indicates that your business operates under international standards developed by globally-established experts at ISO. Each ISO standard has its own advantages, depending on how you’ve identified the gaps in your business. You can learn more about ISO certifications here.
Experts for buyers
Are you a prospective buyer looking for insight on how to qualify businesses? Or perhaps you’ve found a company, but you’d like some extra assurance on its valuation? Sign up for our newsletter to ensure you don’t miss our next article: Which Expert Do You Need When Buying a Business.
Helping you make your next move
At First West Capital, our team of experienced business analysts are ready to help your business grow, acquire and transition. Whether you’ve been diligently preparing for your next great undertaking or have been feeling stuck trying to make a purchase work, we have resources that can help you reach your business goals.
Want to learn more? Contact us today.