You slog more than 12 hours per day, almost without any break to bring your business to where it is today.
One day you realized that it may be time to sell your shares in a company or your business.
There could be many reasons to consider selling something that you have spent so much time to build and we won’t go into these reasons here.
From the day you decide to explore the prospect of selling your business, one thing that invariably will pop up is this – at what price should I sell my business?
To sell a business, it is like selling anything of value. You want to sell it a the highest possible price. And just like selling any asset, you can only fetch the highest possible price if your business is at its best possible condition.
At the bare minimum, you want to sell your business without the major flaws or deal breakers being exposed in the process.
Why is proper sale preparation important?
Selling a business is unlike selling a house. It is usually a much longer process because so much of a business’s value is tied to intangible assets such as intellectual property, processes, talents, customer base, etc that potential buyers will need time to assess its value. You don’t want to spend weeks or even months selling your business only for the buyer to find a huge flaw in your business just before signing the sale & purchase agreement.
Next, there are typically far fewer buyers of a business than a piece of real estate or a motor vehicle. Hence, you don’t want to waste any potential buyer that expresses interest.
Lastly, selling a business is usually very sensitive as you don’t want your employees and customers to know about a impending sale till the appropriate time. Hence, any failure may have some negative impact on your business.
Areas to look out for in a sale
- Chemistry – we found that many deals fail because there is a fall out between the buyer and seller, especially when both sides have big egos to soothe. That is why it is especially important to have an adviser or broker to act as “go between” the buyer and seller. This is especially important if the situation is not suitable for either party to negotiate directly, e.g. the seller may have to work with the buyer for some time after the sale.
- Taxes – this is often a serious problem for closely held private companies especially if the buyer is a more professionally run outfit. Many small business owners have a different perspective of taxes and taxes have a huge influence of the price of the deal. Next, tax planning has a huge bearing on deal structure. Hence, it is often good to discuss about taxes upfront.
- Customer base – if a business is highly dependent on a small number of customers then its value is often much reduced because of the risks of customer concentration. Whether your customers are paying you on time also have a huge bearing on price.
- Management quality – any sizable business will require internal workflows and controls to run smoothly. If the buyer finds the business is not managed up to its liking during due diligence, he may walk away from the deal or ask for a reduced price.
- Talent – a buyer often decides to buy a business because of the available talent in the business. This is especially true for service business. If a potential buyer finds that he cannot retain or depend on the available talents to manage the business, he may walk away from the deal.
- Growth – Risks will invariably increase greatly revenue and profit growth prospects are poor.
- Information presentation – unless you have a business that is in extremely high demand, no buyer will have confidence or patience to buy your business if you cannot clearly explain the attractiveness and value of your business. A well drawn up information memorandum is often speeds up the selling process.
How we can help you increase the selling price of your business or company?
There are many advantages in engaging professional business or company sale expert or business broker to help you sell your company or business.
- Showing the best sides effectively – we can help to present your business in the best possible light to potential buyers and investors. We can help you tailor your business’s unique selling points to different buyers as they often look for different things. Hence, the message that we communicate to different buyers must be different.
- Build financial models that justify the asking price – Many buyers especially the more sophisticated ones such as fund managers and big corporations will look at how your asking price can be justified economically. We can help you build robust financial models that will support your asking price.
- Identify potential buyers confidentially – Often business sellers do not know who are all the potential buyers for his business or company. Sellers often are not able to reach out to potential buyers as public knowledge of such sale could hurt business. That’s where we come in to help bridge the gap. Good brokers and advisers have extensive network of buyers and investors they can tap into. Hence, professionals like us can identify and reach out to many potential buyers quickly and efficiently while helping to protect the seller’s identity.
- Negotiation and Deal Structuring – We can provide invaluable advice on negotiation tactics and act as go between on sensitive issues in order to protect the relationship between buyer and seller. Business sale often requires complex structuring and we are able to provide advice on such matters. We will use our extensive experience to help you plan and execute negotiation strategies in order to achieve a win-win deal.
- Drive the sale process forward – A business or share sale process takes a lot of time and effort. We can act as your project manager in making sure there is sufficient attention in this important endeavor so that it moves forward according to an agreed schedule. We help to coordinate efforts with different professionals such as lawyers and auditors to ensure the process is smooth.
- Ensure due diligence is well prepared and managed – During the later stages of the process, the buyer or investor will want to conduct commercial, financial and legal due diligence on the business he is buying. This process is usually time consuming and critical stage of the process. Buyers will often have many questions and requests during this stage. The outcome of this stage often determine the price and terms of the deal. We can help you prepare this crucial stage of the process and advice you on the answers to provide to potential buyers.
The above are just some of the many reasons that you should engage professional help in selling your business or shares in your company.
If you have any questions regarding selling your business, please feel free to contact Henry Ong at email@example.com or call us at +65 6681-6713.