March 2024 – Preparing to Sell

Preparing Your Company to Sell?

It’s common for business owners to feel overwhelmed at the prospect of selling their business. Between finding the right acquisition partner, compiling all the diligence materials, and making sure your employees are taken care of, it can be a burdensome process. Plus, there’s the emotional toll and vulnerability that comes with letting others into the company and culture you’ve spent years building—and you have to deal with all this while continuing to run the business as usual.

Since the sales process can be so involved, it helps to break it down into manageable steps. Here are some of the key steps in preparing your company for a future sale:
1. Defining your objectives 
2. Collecting and organizing standard diligence materials
3. Documenting and refining your systems
4. Solidifying your team

This month, we'll focus on Step 1: Defining your objectives.

As Yogi Berra said, “If you don’t know where you are going, you might wind up someplace else.” Laying out what success looks like for you in a potential transaction is the most important place to start. Below are a few key considerations and questions to answer during this first step of the process.

Outline your personal goals for the transaction

+ How long do you want to stick around after the transaction, if at all?  
+ What areas of the business do you enjoy and want to focus on after the transaction
+ What are your valuation expectations?
+ How can you structure things to be the most tax-efficient?

Establish what benefits are important for an acquisition partner to offer your employees

+ What benefits do they offer (medical, HSA, life insurance, etc.)?​  
+ What type of career growth have they provided for employees?​
+ Do they offer a 401k with a company match?​
+ What do their current employees say about them?
+ What programs do they have in place for leadership development?​

Identify the right type of acquisition partner

+ What are their values and what sort of culture do they want to build?​  
+ Will they rebrand or change the name of the company?
+ Will they retain the existing team, or replace it with their own people?​
+ What is the long-term strategy?​
+ Who else have they partnered with in the past and what do those people say about the acquisition partner?​
+ Will costs be immediately cut, or will the acquisition partner increase capital expenditures to help continue growing the business?​
+ What corporate partnerships are in place to help the local business (discounts from vendors, more referrals, etc.)?
+ What support capabilities does the partner have that can help your business grow and improve?
+ What is the industry tenure and track record of the acquisition partner? Do they understand the industry and is their market strategy aligned with your approach?

Consult with peers who have been through the process

+ Who do you know and trust that has been through the process and can give you honest feedback?  
+ What did they learn during their transaction?
+ What has their experience been like post-transaction?
Once you have defined your personal goals, developed an avatar of what you believe to be the ideal acquisition partner, and had several conversations with others who have gone through the process before you, you’ll find your path through the transaction process much clearer. 

Next month, we’ll dive into Step 2: Collecting and organizing standard diligence materials. This will include guidance on financial preparation, presenting job data, what data to prepare for standard diligence requests, and more. After first defining your objectives in a transaction, collecting and organizing the standard diligence materials a potential buyer will likely request will make the diligence process much smoother and help present a well-run company that is more attractive to buyers. 

Griffin Brand, VP of Corporate Development

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